Presentation2 - MICRO YO Price Elasticity of Demand Tells...

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Click to edit Master subtitle style 5/12/09 MICRO YO!
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5/12/09 Price Elasticity of Demand Tells us the responsiveness of consumers in response to price changes Elasitic if Ed>1 Small price changes result in large quantity changes Ed=change in the quant dem of x/change in price of x =change in quant/original quant//change in price/change in price Midpoint formula=change in quant/sum of
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5/12/09 Elasticity can tell us How a price change affects TR TR=p*q The total amount consumers spend on Q* at p* How changes in supply and demand effect market equilibrium How price change changes quant dem
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5/12/09 Determinants Number of substitutes A good with many substitutes will be elastic The time the consumer has to respond The more time the more elastic The proportion of income the good requires The less the proportion of income the more elastic
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5/12/09 Price Elasticity of Supply Scarcity determines price Measures responsiveness of the quantity supplied to a price change How changes in supply and demand effect market equilibrium How much a price change will affect quant supp
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5/12/09 Determinants Substitu tability More substit utes, more elastic Prices must rise if product ion inc
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5/12/09 Other elasticities
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