Unit 2: Elasticity, Consumer Choice, Costs

Lesson 4b: Other Types of Elasticity

Determinants of Price Elasticity of Demand and Supply

DETERMINANTS OF PRICE ELASTICITY OF DEMAND Number of Substitutes Many more price elastic Few less price elastic Luxury or Necessity Luxary more price elastic Necessity less price elastic Price of the product as a percent of sonsumer income Price is a large percent of consumer income more price elastic price is a small percent of consumer income less price elastic Time Long time between price and when we measure quantity more price elastic Short time between price and when we measure quantity lessprice elastic   DETERMINANTS OF PRICE ELASTICITY OF SUPPLY Time More time for producers to respond to the price more price elastic Less time for producers to respond to the price less price elastic Ease of Storage Easy and cheap to store the product more price elastic Difficult and expensive to store the product less price elastic Available Excess Capacity A lot of extra room in the factory more price elastic Little extra room in the factory less price elastic Characteristics of the Production Process Easy to expand capacity more price elastic Difficult to expand capacity less price elastic

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