Unformatted text preview: • Quantity demanded is when you move along the demand curve • Demand involves the shifters PRICE ELASTICITY (change in q / q1) / (change in price p / p1) = (change in q / change in p) x (p1/q1) • Three ranges in price elasticity •-infinity < X < -1 elastic X = elasticity • X = -1 unit elastic p = price •-1 < X < 0 inelastic q = quanity Cutting price: what happens to total revenue? Two factors: Increase units Decrease revenue ***If demand is price elastic, price and total revenue move in opposite directions – price goes up – demand goes down ***If demand is price inelastic price and total revenue move in the same direction – price goes up – revenue goes up Price elasticity could be different at different points...
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This note was uploaded on 05/16/2008 for the course EC 201 taught by Professor Xasdf during the Fall '08 term at N.C. State.
- Fall '08