On exam 2: part of chap 4, chap 5, chap 6 (plus some stuff)Finishing up the elasticityWhat we have coveredWhat determines elasticityWhy we care about elasticityHow to calculate elasticityHow to use elasticityCross price elasticity(change in quantity demanded)/(average quantity demanded)/(change in price)/(average price)elasticity is not slopewhen you move from the top to the bottom of a demand curve, the elasticity decreasescross price elasticitycross price elasticity is positive if they are substitutesit is the exact opposite for compliments so they are negative 185elasticity of supply p 190time is the only thing that will effect elasticityas more time passes supply becomes more elastic“if there is more time they can react to the price increase”income elasticity of demandhow does the quantity demanded change when your income changestooth paste compared to trips when you win the lotterynecessity: small income elasticity of demandluxury: large income elasticity of demandinferior good: negative income elasticity of demandcombining elasticity with tax (not in book)elasticity of supply/(elasticity of supply +elasticity of demand)percentage of any tax that will fall on the buyerelasticity of demand/(elasticity of supply+ elasticity of demand)that is the percentage that will fall on the sellerThe more elastic the supply is , the more of the tax falls on the BUYERThe more elastic the demand is, the more the tax falls on the SELLERPQPq7614501070165214Calculates what portion of a 10 dollar tax will fall on the buyer and what portion on the seller.Lab—Private benefit + external benefit = social benefitEcon 142 02/24/2014On exam 2: part of chap 4, chap 5, chap 6 (plus some stuff)Finishing up the elasticity -What we have coveredoWhat determines elasticityoWhy we care about elasticityoHow to calculate elasticityoHow to use elasticityoCross price elasticity(change in quantity demanded)/(average quantity demanded)/(change in price)/(average price)elasticity is not slope-when you move from the top to the bottom of a demand curve, the elasticity decreases cross price elasticity-cross price elasticity is positive if they are substitutes-it is the exact opposite for compliments so they are negative 185elasticity of supply p 190-time is the only thing that will effect elasticity-as more time passes supply becomes more elastic-“if there is more time they can react to the price increase”income elasticity of demand-how does the quantity demanded change when your income changes-tooth paste compared to trips when you win the lotteryonecessity: small income elasticity of demandoluxury: large income elasticity of demandoinferior good: negative income elasticity of demandcombining elasticity with tax (not in book)-elasticity of supply/(elasticity of supply +elasticity of demand)-percentage of any tax that will fall on the buyerelasticity of demand/(elasticity of supply+ elasticity of demand)-that is the percentage that will fall on the sellerThe more elastic the supply is , the more of the tax falls on the BUYERThe more elastic the demand is, the more the tax falls on the SELLERP Q P q76 14 50 1070 16 52 14Calculates what portion of a 10 dollar tax will fall on the buyer and what portion on the seller.Lab—Private benefit + external benefit = social
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