Elasticity

Chapters 20 & 21
springyity & Consumer Behavior/Utility Maximization

I. wrong centering of demand
A. catch is the responsiveness of consumers to a ? in
monetary value
1. Elastic: ? in set leads to significant ? in Qd
2. Inelastic: ? in price does not lead to significant ? in
Qd

II. Price Elasticity Coefficient [ignore the minus sign]
A. Ed = %? in Qd / % ? in P
a. Elastic = Ed > 1
b. unit of measurement Elastic = Ed = 1
c. Inelastic = Ed < 1

B. Mid Point Formula
a. outrankly analysis solves problem of $5-$4/$4-$5 dilemma

III. Total receipts Test of Elasticity
A. TR = P x Q
B. Elastic = P ( whence TR (; if P ( the TR (
C. Inelastic = P (then TR (; if P ( then TR (
D. Unit Elastic = if P changes then TR remains unchanged

IV. Total revenue and Linear Demand Curve Relationships
A. Upper portion of a demand curve is elastic, middle is unit elastic and glare portion is inelastic

V. Determinants of Price Elasticity of Demand
A. Substitutability
B. Proportion of Income
C. Luxury vs Necessity
D. Time

VI. Applications of Price Elasticity of Demand
A. Bumper Crops
B. Excise Taxes
C. Decriminalization of Illegal Drugs
D. Minimum Wage

VII. Elasticity of Supply
A.



Key Determinant is Time
a. Short-run vs Long-run

B. Applications of Supply
a. Antiques vs Reproductions
b. Volatile Gold Prices

VIII. hide Elasticity of Demand [do not ignore the minus sign]
A. Exy = %? in Qd of X / %? in P of Y
a. Substitutes will stick out a positive coefficient, the larger the value the greater the substitutability
b. Complements will have a negative coefficient, the larger the coefficient the greater they are complements
c. Applications: determines price changes for businesses producing substitutes or complements

IX. Income Elasticity
A. Ei = %? in...If you want to get a full essay, order it on our website: Orderessay



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