Elasticity (3 pages)

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Elasticity

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In this lecture we talked about elasticity of demand and the ways in which this occurs.


Lecture number:
5
Pages:
3
Type:
Lecture Note
School:
The University of Oklahoma
Course:
Econ 1123 - Princ. of Econ-Micro
Edition:
1

Unformatted text preview:

ECON 1123 1st Edition Lecture 5 Outline From Previous Lecture Lecture 4 I Supply A Graphical View II Demand Supply and Price Determination in Competitive Markets III Changes in Demand and Supply A Increases in buyer s incomes B Stronger Buyer s tastes C Buyer s expect higher future prices and or higher future incomes D More buyers in the market E Higher prices for substitutes F Lower Price for Compliments Outline Lecture 5 I Changes in Demand or Supply The General Cases II Total revenue TR and Total expenditure TE III The concept of elasticity A Price Elasticity of Demand Ed 1 Three Possibilities 2 Relationship between Ed 3 Determinants of Ed Lecture 3 Notes IV Changes in Demand or Supply The General Cases This was just a review of the fact that if we have a higher demand then the demand schedule shifts to the right This makes price and quantity increase If supply increases the supply schedule will shift to the right and the price will go down while the quantity goes up V Total revenue TR and Total expenditure TE These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Total Revenue and Total expenditure will always be the same TR and TE both equal price per unit times the number of units If Total revenue increases the price and quantity will increase But what happens when price goes down and quantity goes up see concept of elasticity VI The concept of elasticity Elasticity is a measure of how responsive buyers are to price changes everything else being the same B Price Elasticity of Demand Ed Elasticity of demand percentage change in quantity demanded percentage change in price 1 Three possibilities Elasticity of Demand 1 change in quantity demanded price change in other words a relatively small price change equals a large increase in demand Elasticity of Demand 1 change in quantity demanded change in price inelastic demand Elasticity of demand 1 change in quantity



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