ECON 1201 Lecture 10: ECON 1201 , Lecture 10 , Elasticity

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ECON 1201 Lecture Notes - Lecture 9: Price Floor, Economic Surplus, Deadweight Loss

ECON 1201 Lecture 10: ECON 1201 , Lecture 10 , Elasticity

ECON 1201 Lecture 11: Economic Lecture 11 note The price elasticity of supply

Document Summary

Elasticity changes in price, income, and pricing of other goods. Measure of how responsive or sensitive consumers/producers are to. % px (perfectly inelastic) (perfectly (i. e. - . 5) elastic) Good with close substitutes : more elastic demand. Demand is more elastic over longer time horizons. Share of income spent on a good out of customer"s budget greater fraction of income spent on good, more elastic. Price elasticity and its relationship to total revenue or total expenditures in an industry. Total revenue or total expenditure (tr or te) is the amount paid by buyers and received by sellers of a good. It is the price of the good times the quantity sold (p x q) There is a direct relationship between price elasticity and tr. The impact of a price change on total revenue (the product of price and quantity) depends on the elasticity of demand. If demand in price is inelastic, price and total revenue move in the same direction.

Related Questions

PROBLEM SET ONE -2 - PRICE-ELASTICITY OF DEMAND

	P₁	P₂	Q_D1	Q_D2	I	II	III	IV	V
1	1	2	10	5
2	5	3	40	90
3	12	20	200	200
4	3	2	9	9
5	0.40	1.40	30	15
6	1.2	4.0	20	15
7	7.5	4.6	40	30
8	5	5.000â¦01	1x10⁶	0
9	5	4.9999â¦.	10	1x10⁹
10	6	12	12	6
11	18	36	360	180
12	7	15	24	16
13	7	16	78	78
14	25	65	150	100
15	65	91	1300	780
16	4	5	21	11
17	8	4	30	54
18	140	275	625	495
19	78	91	780	780
20	91	78	780	780

Column I - determine the Price-Elasticity of Demand Coefficient. Find material in Chapter 6 and the Powerpoint of Elasticity Chap 004 19e.ppt

change in quantity demanded change in price

E_D = ---------------------------------------- â ----------------------------

sum of quantities demanded / 2 sum of prices / 2

The data in the first four columns represent price (P) and quantity demanded (Qd) in time 1 (before change in price) and time 2 (after change in price). Note that results should be expressed in absolute terms (see paragraph Elimination of Minus Sign). For example, -1 should be expressed as â1â.

Column II â Based on topic concerning Interpretations of E_D, indicate which applies based on how the quantity demanded changed subsequent to a change in price (elastic, inelastic, etc.)

Column III - you need to determine if the good in question would be considered a necessity, a luxury or neither.

Column IV â Indicate, in monetary terms, how much is the change in total revenue or total expenditure (TR = P X Q_D), from the first price level to the second.

Column V - the direction of the change, also in monetary terms, that is, increasing or decreasing, and by how much? (show a + sign for increasing and a â sign for decreasing).

Note: for any monetary result please include the applicable currency symbol ($, â¬, etc.)

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ECON 1201 Lecture 10: ECON 1201 , Lecture 10 , Elasticity

ECON 1201 Lecture Notes - Lecture 9: Price Floor, Economic Surplus, Deadweight Loss

ECON 1201 Lecture 10: ECON 1201 , Lecture 10 , Elasticity

ECON 1201 Lecture 11: Economic Lecture 11 note The price elasticity of supply

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