Principles of Economics- Mankiw (5th) 93

Principles of Economics- Mankiw (5th) 93 - $4 Quantity...

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(a) Perfectly Inelastic Demand: Elasticity Equals 0 $5 4 Demand Quantity 100 0 (b) Inelastic Demand: Elasticity Is Less Than 1 $5 4 Quantity 100 0 90 Demand (c) Unit Elastic Demand: Elasticity Equals 1 $5 4 Demand Quantity 100 0 Price 80 1. An increase in price . . . 2. . . . leaves the quantity demanded unchanged. 2. . . . leads to a 22% decrease in quantity demanded. 1. A 22% increase in price . . . Price Price 2. . . . leads to an 11% decrease in quantity demanded. 1. A 22% increase in price . . . (d) Elastic Demand: Elasticity Is Greater Than 1 $5 4 Demand Quantity 100 0 Price 50 (e) Perfectly Elastic Demand: Elasticity Equals Infinity
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Unformatted text preview: $4 Quantity Price Demand 1. A 22% increase in price . . . 2. At exactly $4, consumers will buy any quantity. 1. At any price above $4, quantity demanded is zero. 2. . . . leads to a 67% decrease in quantity demanded. 3. At a price below $4, quantity demanded is infinite. Figure 5-1 T HE P RICE E LASTICITY OF D EMAND . The price elasticity of demand determines whether the demand curve is steep or flat. Note that all percentage changes are calculated using the midpoint method....
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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