Principles of Economics- Mankiw (5th) 95

Principles of Economics- Mankiw (5th) 95 - CHAPTER 5 E L A...

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Unformatted text preview: CHAPTER 5 E L A S T I C I T Y A N D I T S A P P L I C AT I O N 99 Figure 5-2 Price $4 T OTAL R EVENUE . The total amount paid by buyers, and received as revenue by sellers, equals the area of the box under the demand curve, P Q. Here, at a price of $4, the quantity demanded is 100, and total revenue is $400. P P Q $400 (revenue) Demand 0 100 Quantity Q Price Price $3 Revenue $1 Revenue 0 $100 Demand 100 Quantity 0 $240 Demand 80 Quantity H OW T OTAL R EVENUE C HANGES W HEN P RICE C HANGES : I NELASTIC D EMAND . With an inelastic demand curve, an increase in the price leads to a decrease in quantity demanded that is proportionately smaller. Therefore, total revenue (the product of price and quantity) increases. Here, an increase in the price from $1 to $3 causes the quantity demanded to fall from 100 to 80, and total revenue rises from $100 to $240. Figure 5-3 CCebook 原版电子书仓库 eBook ...
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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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