ECON 2000 1st Edition Lecture 12Outline of Last Lecture XXXI. Price Ceilinga. Legally established maximum priceb. Examplec. Binding/effective*** EXAM 1***Outline of Current LectureI. Consumer Surplusa. Definitionb. equationc. GraphII. Producer Surplusa. Equationb. GraphIII. Price Elasticity of Demanda. Definitionb. Elasticityc. Inelasticd. Equatione. Factors influencing EdCurrent LectureI. Consumer Surplusa. Definitioni. We do not always pay what we are willing to, what we are willing to is described as valueb. equationi. CS= Value of good – Cost Paid c. Graphi. Left of Demand Curveii. Above Market EquilibriumII. Producer Surplusa. Equationi. PS= Product Sold price – value (or cost)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.b. Graphi. Left of Supply curveii. Below Market EquilibriumIII. Price Elasticity of Demanda. Definitioni. Tells us HOW MUCH consumers adjust their buying behavior with respect to changes in priceb. Elasticityi. Consumers respond to a price change significantly1. Say I buy 100 sandwiches from McDonald’s each year. Then McDonald’s change their hamburgers from $1.00 to $2.00. I go from buying 100 sandwiches to 10. This drastic change makes means I acted in an elastic manor.c. Inelastici. Consumers do not respond significantly to price changes1. In the same scenario. If McDonald’s increases their price, and I stillbuy 95 sandwiches a year, I am acting inelastic because I do not change my habits by much.d. Equationi. ii. If the formula is > 1 = Elasticiii. If the formula is < 1 = Inelasticiv. If the formula is =1 = Unitary elasticitye. Factors influencing Edi. Level of Income1. Wealthy (i) poor (e)ii. Strength of preference1. Strong (i), not strong (e)iii. Need vs. Want1. Need (i) Want (e) iv. Number of Substitutes1. Few (i) A lot
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