E303lect16F09

E303lect16F09 - September 28, 2009 Reading Baye, Ch 3. pp...

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September 28, 2009 Reading Baye, Ch 3. pp 73-82 (Next time) Exam: NOTE: We NEED ONE MORE DAY – THE EXAM WILL BE WED. Oct. 7 Problem Set #5 on Blackboard Due Friday Lecture 16 REVIEW___________________________________________________: III. Quantitative Demand Analysis A. Price Elasticity of Demand 1. Motivation 2. Calculation η = % Q d /% P = Q/Q = QP P/P PQ a. Arc price elasticity of demand. η = (Q 1 -Q 0 )(P 1 +P 0 )/2 (P 1 -P 0 )(Q 1 +Q 0 )/2. Arc Price elasticity is interpreted as follows: Over the range of prices between $4 and $5 on average, a 1% reduction in price increases quantity demanded by 5.4 %. PREVIEW________________________________________________ b. Point price elasticity of demand c. Percentage Changes 3. A Graphical Interpretation of Price Elasticity . 4. Some Observations about η 5. Price Elasticity, MR and TR 6. Determinants of Price Elasticity LECTURE________________________________________________ b. Point price elasticity : When you are given a slope, and a point.
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E303lect16F09 - September 28, 2009 Reading Baye, Ch 3. pp...

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