Econ 09 19 14 Chapter 6 Class lecture overview 1 price elasticity of demand 2 demand and nonprice factors Inexpensive products inelastic not very responsive Would not change so much cus it s still cheap after the price raise Necessities inelastic affordable or if not do without Long run demand becomes more elastic Become more and more responsive Due to a change of lifestyle Short term no choice TR total revenue price times quantity sold TR P x Q sold If the price is highly price elastic a change in p will cause the TR to change in the opposite direction if P TR if P TR If the demand is price inelastic a change in P will cause TR to change in the same direction if P TR If P TR Income elasticity of demand consumer response to a change in income Ex Demand for food income inelastic basic food Demand for luxury income elastic extremely responsive Cross elasticity of demand Cross elasticity change in the QD for B change in the price of A If cross elasticity is positive substitutes same market
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