Chapter 5 Notes

Chapter 5 Notes - Chapter 5 03/03/07 - Price elasticity of...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 5 03/03/07 - Price elasticity of demand Measures how much the quantity demanded responds to a change in P. The price elasticity of demand is closely related to the slope of the demand curve. The flatter the curve, the larger the elasticity, vice-versa for steeper curve. - Total Revenue Price X Quantity Higher price means more money per ticket but less people buying them - Elasticity If demand is elastic, then price elasticity of demand is >1 % Change in Q > % change in P The fall in revenue from lower Q is greater than the increase in revenue from higher P, so revenue falls. When Demand is elastic a price increase causes revenue to fall. Rise in price leads to quantity and TR going down Decrease in Price leads to a higher quantity and TR. - Inelasticity Inelastic if less than 1. % Change in Q < % change in P The fall in revenue from lower Q is smaller than the increase in revenue from higher P. Quantity does not drop as much when prices are raised like it does when
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/17/2008 for the course ECO 201 taught by Professor Zenker during the Spring '08 term at Elon.

Page1 / 2

Chapter 5 Notes - Chapter 5 03/03/07 - Price elasticity of...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online