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CAS
Mirco Economics
Demand Curve
Price
Supply
Demand
Quantity
Factors
that affect
Demand
Quantity
Demand
Change in
price
Demand
1. Average
income
2. Prices of other
goods (substitues
or complements)
3. Taste
4. Distribution of
income
5. Population
6. Expectations
about future
Supply
Quantity
Supply
Change in
price
Supply
1. Price of inputs
2. Technology
3. Governemnt
taxes or
subsidies
4. Expectations
about the future
6. Number of
suppliers
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Business
CAS
Elasticity (η)
η = (percent change in quantity demand)
(percentage change in price)
=
ΔQD / QD
Δp / p
Inelastic demand (η < 1)
Elastic demand (η > 1)
Unitary demand (η = 1)
Cross Elasticity of Demand
ηxy = (percentage change in quantity demand of good x)
(percentage change in price of good y)
If ηxy > 0 then x & y are substitutes.
If ηxy < 0 then x & y are complements.
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