Ch. 7 Outline - Chapter 7 Outline Consumer Choice and...

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Chapter 7 Outline Consumer Choice and Elasticity Econ 1B, Spring 2010 A. First Paper 1. See Paper #1 Description B. Consumer choice 1. Choice 2. Purpose 3. Substitutes 4. Information 5. Diminishing marginal utility C. Price changes and consumer choice 1. Substitution effect a. b. 2. Income effect a. b. D. Elasticity – The measure of the relative responsiveness of one variable to a change in another. It is the percentage change of a dependent variable to an independent variable. 1. Producers need to know what happens when they raise or lower prices a. b. c. 2. A measure of the sensitivity of Q d to changes in price a. Price elasticity of demand b. Elasticity on a demand curve 1) Elastic 1
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2) Unit elastic 3) Inelastic 4) Totally elastic or inelastic c. Point elasticity 1) 2) d. Arc Elasticity 1) 2) 3) e. Interpreting price elasticity calculations 1) magnitude a) b) c) 2) Total revenue 3) sign f. Comparing different demand curves
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Ch. 7 Outline - Chapter 7 Outline Consumer Choice and...

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