Demand and elasticity

Copyright 1996, Cohen & Froeb

Revised on 8/29/96


Table of Contents


The three laws of demand


Shifts in the demand curve

Other things that affect demand for a product, besides price:

  1. Increases in income generally increase the demand curve (shifts demand up or to the right).
  2. An increase in the price of a substitute increases demand.
  3. An increase in the price of a complement decreases demand.
  4. Changes in taste can increase or decrease the demand curve.


Elasticity


Price elasticity, e

The laws of demand can be restated using price elasticities


Rule of thumb elasticity calculation


Price elasticity and marginal revenue


Discussion Questions