chap6 - Chapter6:Elasticity Elasticity...

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    Chapter 6: Elasticity
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    Elasticity A measure of the responsiveness of  one variable (usually quantity  demanded or supplied) to a change in  another variable Most commonly used elasticity: price  elasticity of demand, defined as: Price elasticity of demand =
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    Price elasticity of demand Demand is said to be: elastic when Ed > 1, unit elastic when Ed = 1, and inelastic when Ed < 1.
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    Perfectly elastic demand
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    Perfectly inelastic demand
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    a price increase from $1 to $2 represents a 100%  increase in price, a price increase from $2 to $3 represents a 50%  increase in price, a price increase from $3 to $4 represents a 33%  increase in price, and a price increase from $10 to $11 represents a 10%  increase in price.  Notice that, even though the price increases by $1 in  each case, the percentage change in price becomes  smaller when the starting value is larger.
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    Elasticity along a linear demand  curve
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    Elasticity along a linear  demand curve
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    Arc elasticity measure where:
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This note was uploaded on 11/04/2010 for the course ECONOMICS Econ211 taught by Professor Marcus during the Spring '10 term at American University of Beirut.

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chap6 - Chapter6:Elasticity Elasticity...

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