ECON Chapter 4 Elasticity

Refers to the Flexibility of consumer's desires for a product

The closer the substitutes and the more substitutes there are, the more elastic is demand

The greater the share of the consumer's total budget spend on a good, the more elastic is demand

The longer any price change persists, the more elastic is demand. Price elasticity is greater in the long-run than in the short run, and in the short-run that right now.

The response of consumers and producers to a change in market conditions will become more pronounced as time passes. This occurs because with time, consumers and producers are able to find substitutes.

• i.e. Demand for Gasoline
• Immediate-run: There is no time to adjust
• Short-run: Time to adjust, but only partially
• Long-run: Time to adjust fully

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