note2 - ch4

note2 - ch4 - Econ 251 Fall 2009 Handout 6 09/10/09 Class...

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Econ 251 Fall 2009 Handout 6 09/10/09 1 Class &otes: Chapter 4 (cont’d) I. Total Revenue and Price Elasticity of Demand Total Revenue (TR) = Ex: Question: What happens to the total revenue (TR) when prices change? b Three Cases: (1) Inelastic demand: (2) Elastic demand: (3) Unit elastic demand: Example : Consider the demand for chocolate bars: 2 16 d Q P = − + Case 1 : Suppose that price increases from P 0 = 2 to P 1 = 4.
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Econ 251 Fall 2009 Handout 6 09/10/09 2 Graphically: Case 2 : Suppose that price increases from P 0 = 5 to P 1 = 7. II. More Elasticities of Demand Cross-Price Elasticity of Demand = measures the responsiveness of the ______________________ of a good to a change ____________________________________ , other things remaining the same. Cross price elasticity of Demand for good x =
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Econ 251 Fall 2009 Handout 6 09/10/09 3 The cross-price elasticity of demand is &OT _______________________________. Ex. 1
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note2 - ch4 - Econ 251 Fall 2009 Handout 6 09/10/09 Class...

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