Rec 3 - TR = total price * quantity If price &...

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Surplus: QS > QD Shortage: QD > QS Equilibrium: QD = QS Elasticity – measure of sensitivity to price change Food is inelastic. No matter how much it costs, you always have to buy it If substitutes are easy to find, the good is elastic. Ex.) cars, clothes Elasticity = %changeQD/%change price %change QD = (New QD – Old QD)/ .5(New QD + old QD) * 100
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Unformatted text preview: TR = total price * quantity If price & total revenue change in the opposite directions, this means that demand is elastic. If price & TR change in same direction, demand is inelastic If elasticity > 1 = elastic < 1 = inelastic =1 = unit elastic Know graphs of perfectly elastic, perfectly inelastic, etc (in the book)...
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