Gobbet 5 - Elasticity

Gobbet 5 - Elasticity - Consumers Quantity Supplied by...

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Gobbet # 5: Elasticity Material adapted from the course text, Harris: Environmental and Natural Resource Economics , 2006 and from Frank and Bernanke: Principles of Economics, 2001 What do we mean by the elasticity of demand and what equation do we use to calculate it? What’s the difference between inelastic demand, elastic demand, and unit-elastic demand? What would the graph of perfectly elastic or perfectly inelastic demand look like? Recall the demand and supply tables from the previous Gobbets, and the corresponding equation for the inverse demand ( which we need because in economics we graph price on the y axis ). PRICE (P) Quantity Demanded by
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Unformatted text preview: Consumers Quantity Supplied by Producers (bottles/month) $0.50 1,100 100 1.00 1,050 300 1.50 1,000 500 2.00 950 700 2.50 900 900 3.00 850 1,100 3.50 800 1,300 4.00 750 1,500 4.50 700 1,700 5.00 650 1,900 6.00 550 2300 11.50 4500 Inverse Demand: P = -0.01 Q d + 11.5 What is the elasticity of demand at the market equilibrium of $2.50? Is demand elastic, inelastic, or unit elastic at this point? What is the elasticity of demand at $6.00? Is demand elastic, inelastic, or unit elastic at this point? Has it changed? If so, has it become more or less elastic? Is this result in line with economic theory?...
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This note was uploaded on 12/16/2009 for the course AEM 2500 taught by Professor Poe,g. during the Fall '07 term at Cornell.

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