PHI 1101 Chapter 5: Elasticity and Its Applications

• School: University of Ottawa
• Department: Philosophy
• Course: PHI 1101
• Professor: Laura Byrne

Document Summary

***read page 11-17 applications of the elasticity of demand. The price elasticity of demand and its determinants. The law of demand is qualitative, price elasticity of demand is quantitative. There"s no specific rule as to what determines a demand curve"s elasticity, but there are theories. Ex) if price elasticity of demand was equal to 2, the change in the quantity demanded is. Computing the price elasticity of demand proportionately twice as large in the change in price (cid:1842)(cid:1870)(cid:1855)(cid:1857) (cid:1831)(cid:1864)(cid:1871)(cid:1872)(cid:1855)(cid:1872) (cid:1867)(cid:1858) (cid:1830)(cid:1857)(cid:1865)(cid:1866)(cid:1856) =% (cid:3004) (cid:3041)(cid:3032) (cid:3041) (cid:3018)(cid:3048)(cid:3041)(cid:3047)(cid:3047) (cid:3005)(cid:3032)(cid:3040)(cid:3041)(cid:3031)(cid:3032)(cid:3031) Quantity moves the same amount proportionately as price. Elasticity is closely related to the slope the flatter the curve, the more of a demand curve; Total revenue and the price elasticity of (cid:1846)(cid:1867)(cid:1872)(cid:1864) (cid:1844)(cid:1857)(cid:1874)(cid:1857)(cid:1866)(cid:1873)(cid:1857)=(cid:1842) (cid:1843) Elastic demand: increase in price = decrease in total revenue. Unit elastic demand: increase in price = constant revenue. **revenue is basically just the area under a certain point of the demand curve.