9-19 Reading Notes- Elasticity

9-19 Reading Notes- Elasticity - than 1. -Elasticity is...

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

View Full Document Right Arrow Icon
Chapter 4- Concept of Elasticity Concept of Elasticity- - A measure of the extent to which quantity demanded and quantity supplied respond to variations in price, income, and other factors. Price elasticity of demand- - Is a measure of the responsiveness of the quantity demanded of that food to changes in its price…. Or - The Percentage changed in quantity demanded that results from a 1 percent change in its price. For example: If a 2 percent reduction in the price of pork led to a 6 percent increase in the quantity of pork demanded, the price of elasticity of demand for pork would be Percentage change in quantity demanded/ Percentage change in price = 6 percent / -2 percent = -.3. Elasticity is defined to be a positive number. Elastic- - Demand is elastic with respect to price is price elasticity is greater than 1. - Elasticity greater than 1 - Quantity is more responsive to price Inelastic - Demand is inelastic with respect to price if price elasticity of demand is less
Background image of page 1

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

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

Unformatted text preview: than 1. -Elasticity is less than one.-Quantity is less responsive to price. Unit elastic-Demand is unit elastic with respect to price if price elasticity of demand equals 1. Price Elasticity of Demand Price elasticity is not ht slope of the demand schedule. A straight line demand schedule has a constant slope but varying elasticity along the schedule. Revenue and Price elasticity Revenue = Price x Quantity Raising price by one percent has two opposing effects on revenue. It raises the price paid by loyal customers, thus raising revenue. It lowers the quantity sold thus lowering revenue. Elasticity tells us which of the opposing effects wins the tug of war When elasticity if greater than one The quantity effect on revenue is larger. When elasticity is less than one The Price effect on revenue is larger....
View Full Document

Page1 / 2

9-19 Reading Notes- Elasticity - than 1. -Elasticity is...

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