ECON 1100 1nd Edition Lecture 11 Outline of Last Lecture I. ElasticityOutline of Current Lecture I.ElasticityII.Special cases of elasticityCurrent LectureI. ElasticityWhat is the elasticity of demand between these 2 pts using the midpoint formula?E = % change QE = % change PCaused to change/causing changeBest to understand what’s going on is to understand the concept and how to apply it1. % change in Q = absolute change Q / avg QAbsolute change: where you end up – where you started(260-300)/(260+300)/2 = -1/7 ~-0.1432. % change in P = absolute change P / avg P(15-10)/(15+10)/2 = 2/5 ~0.43. Elasticity = -0.143/0.4 = 0.36To calculate you must now what is the causation and what is the result so you set the problem up correctlyThese 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 inelasticP increases by 1% and Q decreases by < 1%E < -1 means elasticP increases by 1% and Q decreases by > 1%E = -1 means unit elasticP increases by 1 % and Q decreases by 1%II. Special casesE = 0 thus perfectly inelastic demandPerfectly refers to complete or totalRare situation, eventually should come back to 0Quantity super responsive thus close to infinityPerfectly elasticCan sell as much or little as want at set price, if price changes then Q drops to 0Lines represent 2 demandsElasticity is not a constant termElasticity different at different points of straight lineIn graph to R can’t answer which is more elasticCan say which is more elastic only at crossing point Reading the graph below:Slope is constantSlope & elasticity NOT sameBigger % change at lower price/quantityB = big changeS = small changeI = inelasticU = unit elasticE =
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