Midterm 2 - Review Relative(or simple elastic modest price...

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 5/8/09 Click to edit Master subtitle style Midterm 2  Review
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 5/8/09 Price Elasticity of Demand law of demand says that consumers will buy more of a product when its price declines and less when its price increases Price elasticity of demand: the responsiveness of consumers to a price change. Relative (or simple) elastic: modest price changes  cause very large changes in the quantity purchased  Relative (or simple) inelastic: in whish substantial  price changes cause only small changes in the  amount purchased
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 5/8/09 Revenue and Costs P=TR-TC TR=PQ If  TC<TR earns profit TC>TR earns loss TC=TR break even MR=P=AR=D Total Profit=quantity of output*(price-ATC) Marginal Cost intersects ATC at its minimum Where MC=MR=P, profit level is maximized Shutdown point is where MC=AVC If MR=MC is below shutdown point, it will minimize  losses by stopping productio
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