ECON 1100 1nd Edition Lecture 12 Outline of Last Lecture I. ElasticityII. Special cases of elasticityOutline of Current Lecture I.Lobster applicationII.ElasticityCurrent LectureI. Lobster applicationLobsters like warmer water so when waters off coast of Maine warmed up more lobsters came about thus there was more supply of them. However the industry is still suffering.Supply increased, demand remained about the same, price increasedblue is revenue from 1990purple is revenue from 2012Why is the industry worse off? Selling more but for lessRevenue = $ that company/industry takes in from selling its product -> Q * PThis graph shows general demand curve but if more vertical it is less elastic thus shows more appropriate revenues II. ElasticityDemand for food is fairly inelasticWhat are some factors making demand inelastic:Few substitutesThese 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.Little time to adjustGoods that are small part of total spendingExpectations about future prices –> can be right or wrongP great decrease, small Q increase = decrease revenueP great increase, small Q decrease, increase revenueEx. How to understand what is being asked on graph Arnold: ‘I want 5 gal of gas’Betsy: ‘I want $5 worth of gas’What are their elasticities of demand?Perfectly elastic (R)E=0 (R)Unit elastic (L)E=-1
View Full Document
Unlocking...