# ch4 - Chapter 4: Elasticity Monday, June 28 Tuesday, June...

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Chapter 4: Elasticity Monday, June 28 Tuesday, June 29

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Quantity supplied doesn’t depend on price at all. 0 10 20 30 40 50 60 70 80 90 100 0 quantity price D=160-2P S=60
Quantity demanded doesn’t depend on price at all. 0 10 20 30 40 50 60 70 80 90 100 0 quantity price D=80 S=4P-80

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PERFECTLY ELASTIC SUPPLY Below 50, quantity supplied will be zero. At or above 50, quantity supplied will be enough to cover all demand. 0 10 20 30 40 50 60 70 80 90 100 0 quantity price D=160-2P P=50
PERFECTLY ELASTIC DEMAND At or below 30, quantity demanded will be enough to cover all supply. Above 30, quantity demanded will be zero. 0 10 20 30 40 50 60 70 80 90 100 0 quantity price P=30 S=4P-80

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TYPES OF ELASTICITY Elasticity most commonly refers to price elasticity of demand, price elasticity of supply, But there are various other types as well, such as cross-price elasticity of demand, income elasticity of demand, % % Q P D % % Q P S % % QD P X y % % Q I D
PRICE ELASTICITIES Elasticity most commonly refers to price elasticity of demand, ε D , can be written as , or price elasticity of supply, ε S , can be written as , or Q P P Q D D % % Q D P Q Q P P D D % % Q P S Q Q P P S S Q P P Q S S

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DEMAND ELASTICITY EXAMPLE Suppose that when price is 40, the quantity demanded is 20, and when price decreases to 35, the quantity demanded increases to 30. What is the price elasticity of demand at the original price and quantity?   Q P P Q 10 5 40 20 D D 4 old new P 40 35 Q 20 30
QUESTION 1 (price elasticity of demand, from table) Suppose that when price is 10, the quantity demanded is 80, and when price decreases to 5, the quantity demanded increases to 90.

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## This note was uploaded on 08/03/2010 for the course ECON 1 taught by Professor Bergstrom during the Summer '07 term at UCSB.

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ch4 - Chapter 4: Elasticity Monday, June 28 Tuesday, June...

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