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Microeconomics Price Elasticity

# Microeconomics Price Elasticity - Microeconomics Price...

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Microeconomics: Price Elasticity 05/10/2007 13:34:00 Tuesday Oct 9th. 6:30 to 7:45 = review session Wednesday: 2 nd  Midterm! Material Covered -Chapter 3, pages 73-86 -Chapter 4, all including appendix -Chapter 5 125-131 Total Revenue test will be important DO TON OF PRACTICE PROBLEMS Price Elasticity of Demand:  STUDY THIS SHIT!!!!!!!!!! A measure of the responsiveness of a quantity demanded to changes in  price. If it is highly responsive then it is elastic. If it is highly unresponsive then in is inelastic. The percentage of change in the quantity  Ep = %  of the Quantity demanded divided by the %  of the Price o In this instance Price is the CAUSE o The quantity demanded is the EFFECT. The demand for a good is said to be elastic with respect to the price if its price  elasticity is more than 1 The demand for a good is inelastic with respect to price if its price elasticity is  less than 1. Demand is “unit elastic” with respect to price if its price elasticity is equal to  one. You must factor in the percentage because a .75 cent increase in the price of  a coke will have a much larger impact on demand than a .75 cent price  increase in the price of a car.

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