Econ 2z03 chapter 2

Price of the its own changes, observe the movement along the same curve.
Shift variable changes, observe the shifts of the curve.
Endogenous variables(内生变量): variables that a model tries to explain.

Price: own price (movement) or other related goods(shifts)

Demand vs Qd(related to the price)
Equilibrium (market clearing) price: price that equates the Qs to the Qd.
Market mechanism: tendency in a free market for price to change until the market clears.
Surplus: Qd < Qs
Shortage: Qd > Qs

Elasticity: percentage in change one variable resulting from a 1-percent increase in another.
Price elasticity in demand: percentage change in Qd of a good resulting from 1-percent increase in

its price.

Always negative
The price elasticity of demand is depends on the slope of demand curve.
The price and quantity, elasticity various along the curve as price and Q changes.
Slope is constant for this linear demand curve. Constant=
The elasticity becomes smaller as we move down the curve.

Determinants of price elasticity of demand:

1. The existence, number, and quality of substitutes
2. Share of budget, eg, a candy bar increase the price from $1 to $2; a smartphone increase from
$400 to $800.
3. The length of time allowed to adjust (exception: durable goods, eg, car and house. Demand is
more elastic in the short run.) 如果准备换车，车的价格突然上涨，决定暂时不买，等价
格下降后再买。