UI ECON 1100 - Elasticity & Midpoint (3 pages)

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Elasticity & Midpoint



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Elasticity & Midpoint

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Lecture number:
11
Pages:
3
Type:
Lecture Note
School:
University of Iowa
Course:
Econ 1100 - Principles of Microeconomics
Edition:
1

Unformatted text preview:

ECON 1100 1nd Edition Lecture 11 Outline of Last Lecture I Elasticity Outline of Current Lecture I Elasticity II Special cases of elasticity Current Lecture I Elasticity What is the elasticity of demand between these 2 pts using the midpoint formula E change Q E change P Caused to change causing change Best to understand what s going on is to understand the concept and how to apply it 1 change in Q absolute change Q avg Q Absolute change where you end up where you started 260 300 260 300 2 1 7 0 143 2 change in P absolute change P avg P 15 10 15 10 2 2 5 0 4 3 Elasticity 0 143 0 4 0 36 To calculate you must now what is the causation and what is the result so you set the problem up correctly 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 P elasticity of demand is always negative Understanding number line 1 E 0 means inelastic P increases by 1 and Q decreases by 1 E 1 means elastic P increases by 1 and Q decreases by 1 E 1 means unit elastic P increases by 1 and Q decreases by 1 II Special cases E 0 thus perfectly inelastic demand Perfectly refers to complete or total Rare situation eventually should come back to 0 Quantity super responsive thus close to infinity Perfectly elastic Can sell as much or little as want at set price if price changes then Q drops to 0 Lines represent 2 demands Elasticity is not a constant term Elasticity different at different points of straight line In graph to R can t answer which is more elastic Can say which is more elastic only at crossing point Reading the graph below Slope is constant Slope elasticity NOT same Bigger change at lower price quantity B big change S small change I inelastic U unit elastic E elastic



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