By the end of this chapter, you should understand:
- how elasticities measure responsiveness of demand or supply
- the price elasticity of demand
- how it affects the revenue effect of a price change
- why bad harvests may help farmers
- the fallacy of composition
- how cross-price elasticity relates to complements and substitute
- income elasticity of demand
- inferior, normal, and luxury goods
- elasticity of supply
- how supply and demand elasticities affect tax incidence
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