Class Notes - 9-21-07

Class Notes - 9-21-07 - Microeconomics Class Notes 9/21/07...

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Microeconomics – Class Notes – 9/21/07 EDUSPACE DOES NOT UNDERSTAND FRACTIONS CHAPTER 4 ELASTICITY HUGELY IMPORTANT o How responsive one variable is to another o Elasticity – The sensitivity of one variable to change in another o 2 TYPES OF ELASTICITY ( ONLY ) I. Price of Elasticity of Demand Type of elasticity is going to tell you what variables we are working with in a problem The responsiveness of Quantity demanded to the change in Price A. Calculation: E(d) = (% change in Quantity demanded) / (% change in Price) a. Is used to predict quantity demanded b. % change in x = (X1 – X0) / (X0) * 100% i. Replace “x” with either p or q ii. Take decimal place out to at least 1 place iii. DO NOT DO MIDPOINT!!!! iv. Calculate the percentage change for each variable instead of using the midpoint formula c. Example: Cookie Monster i. (income = $100) ii. P0 = $1, Q0 = 100 iii. P1 = $2, Q1 = 50 iv. Ed = (Change in Q / Q0) / (Change in Price) / P0) 1. [(50-100) / 100] * (100)
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Class Notes - 9-21-07 - Microeconomics Class Notes 9/21/07...

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