ECO101H1 Lecture Notes - Lecture 7: Demand Curve, Royal Ontario Museum, Normal Good

• School: UTSG
• Department: Economics
• Course: ECO101H1
• Professor: Jack Carr

Document Summary

1) if you know 2 points on the demand curve, calculate elasticity using the. 2) if you know the slope of the demand curve and the point (p,q) on the demand curve, then: elasticity = p / q * (1/slope) Key: understand why (price) elasticity of demand is so important. = percent change in quantity demanded / percent change in price. Key result: total revenue = price * quantity. In response to an increase in price, total revenue: Inelastic demand curve (tr if p ) (revenue at old price) (revenue at higher price) In this case, revenue increase exceeds revenue decrease, so total revenue rises as price increases. Two opposing forces when there is an increase in price: revenue increases because continuing customers pay the higher, revenue decreases because some customers will not pay the higher. For an inelastic demand curve, 1 is greater than 2. For an elastic demand curve, 2 is greater than 1.