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September 30, 2008
Reading
Baye, Ch 3. pp 7684 (the test will
go through p. 84)
Exam
Wednesday Oct. 7
Problem Set #5 due Friday
Note: For those of you interested in working sample multiple choice problems, go to
http://highered.mcgrawhill.com/sites/0072983892/student_view0/
Click on the chapter of interest, and then ‘sample multiple choice problems”
Lecture 17
REVIEW___________________________________________________:
III. Quantitative Demand Analysis
A. Price Elasticity of Demand
3. A Graphical Interpretation of Price Elasticity.
4. Some Observations about Price Elasticity of Demand
a. Most demand curves have elastic and inelastic segments
b. Exceptions
Perfectly Inelastic
Perfectly Elastic
Constant Elasticity
PREVIEW________________________________________________
c. Elasticity and the slope of demand curves.
5. Price Elasticity TR and MR
6. Determinants of price elasticity
LECTURE_________________________________________________
c.
Elasticity and the slope of demand curves.
Given that most curves have elastic, inelastic and unitary elastic segments,
it is really not appropriate to talk of ‘inelastic’ or ‘elastic’ demand curves.
Nevertheless,
economists typically do.
An ‘elastic’ demand curve is relatively flat (and thus has a large
elastic segment). Similarly, an ‘inelastic’ demand curve is relatively steep (and thus has a
large inelastic segment).
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View Full Document5. Price Elasticity, MR and TR
a. Motivation:
What can we say about the optimality of prices, given limited
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 Fall '08
 SHRESTHA
 Economics

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