04GottElasticityShow

04GottElasticityShow - ELASTICITY Price Elasticity of...

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1 ELASTICITY ELASTICITY Price Elasticity of Demand Cross Elasticity of Demand: Substitute and Complementary Goods Income Elasticity : Normal and Inferior Goods Supply Elasticity Price Elasticity of Demand and Tax Revenues
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2 EXHIBIT 1A DEMAND RESPONSE TO PRICE CHANGE Is quantity demanded responsive to prices changes? Why or why not?
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3 EXHIBIT 2 MARKET DEMAND FOR COCA-COLA AND SPARK PLUGS Quantity demanded of which product is more responsive to prices changes? Why?
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4 What Factors Influence Demand Sensitivity? If all else equal: NECESSITY or LUXURY ? PRICE : the demand for low-priced goods is less elastic. BUYERS’ INCOME : elasticity less for more wealthy. SUBSTITUTES? COMPLEMENTARY (or “linked” goods) PERIOD OF ADJUSTMENT : LR, Market, or SR?
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PRICE Elasticity of Demand Measures sensitivity of Q DD to change in P ( use “ percentage ” changes) (Q2-Q1) / [(Q2+Q1)/2] E d = _______________________________ (P2-P1) / [(P2+P1)/2] Note : Divide by the
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This note was uploaded on 07/14/2010 for the course ECON 1 taught by Professor Bergstrom during the Fall '07 term at UCSB.

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04GottElasticityShow - ELASTICITY Price Elasticity of...

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