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The demand curve becomes flatter, from the same point the more time you have
More elasticity of demand
E.g. If the price of cars increase due to a shift in demand or supply curve, the demand of petrol could
shift to the left or right
With luxuries you buy proportionally more
But with necessities you are buying more but not proportionally more
We need to ask what caused the price increase at the first place
To work out income elasticity it is
Percentage change in quantity / percentage change in income
ELASTICITY OF SUPPLY
Percentage change in quantity supplied / percentage change in price
Answer will always be positive
Elasticity is affected by resources used and time
Resources: if resources are rare, you are unable to quickly change your supply = low elasticity
It is easier to substitute among the resources used to produce or good, the greater elasticity of
supply
If it is hard to find new resources, then it is not very elastic. The more you need your resources, the
lower elasticity of supply
Time = if they have more time, they have more time to adjust and be more elastic, more flexible as
time increases, the more elastic. If time is short, then the supply is not elastic.