{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# 191T1 - ECON191(Spring 2010 8 11 12.2.2010(Tutorial 1...

This preview shows pages 1–2. Sign up to view the full content.

1 ECON191 (Spring 2010) 8, 11 & 12.2.2010 (Tutorial 1) Elasticities of Demand and Supply Price elasticity of demand Percentage change in quantity demanded of a good resulting from a 1-percent change in price Point elasticity VS Arc elasticity Point Elasticity: E p P Q % % Q P P Q P P Q Q Arc Elasticity: E p Q P P Q P P Q Q P Q / / % % Linear demand curve bP a Q where a is the x -intercept and b is the inverse slope ( Q / P ) b Q b a P / / where a / b is the y -intercept and 1/ b is the slope Price elasticity of demand and linear demand curve E p = 0 Perfectly inelastic demand Vertical demand curve E p < 1 Inelastic demand Below midpoint of a linear demand curve E p = 1 Unitary elastic demand Midpoint of a linear demand curve E p > 1 Elastic demand Above the midpoint of a linear demand curve E p = Perfectly elastic demand Horizontal demand curve Price elasticity of demand and total revenue Other demand elasticities Income elasticity of demand: percentage change in the quantity demanded resulting from a 1-percent change in income Q I I Q I I Q Q I Q E I / / % % Income elasticity of demand > 0 for normal goods Income elasticity of demand < 0 for inferior goods Cross-price elasticity of demand: percentage change in the quantity demanded of one good resulting from a 1-percent increase in the price of another good a b b a b b a a b

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 4

191T1 - ECON191(Spring 2010 8 11 12.2.2010(Tutorial 1...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online