Oct 12 Demand Elasticity

Oct 12 Demand Elasticity - DemandElasticities(10/12/10)

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    Demand Elasticities (10/12/10) AEC 305, Food and Agricultural Marketing Principles AEC 305, Food and Agricultural Marketing Principles Read Chapter 4 Schrimper and  applicable sections of the (green)  handout – Dr. Brown’s lecture notes Journal Entry #4 is posted (due as a set  on October 28 th ) 10/14 Class
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    Demand Theory Review Define a Consumer and a Market Demand  Schedule Recall that a demand schedule can be  presented in tabular, graphical, or  mathematical formats Understand the difference between a  change in demand (shift) and a change in  the quantity demanded (movement along a  given demand schedule) Identify demand shifters and direction of  the shift AEC 305, Food and Agricultural Marketing Principles AEC 305, Food and Agricultural Marketing Principles
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    Price Elasticity of Demand Measures the Responsiveness of Changes in  the Quantity Demanded to Small Changes in  Price, Holding All Other Factors Constant  ….  More specifically, the percentage change in  quantity for a given percentage change in  price, holding  income, taste and preferences,  prices of other goods, population,  etc.,  constant AEC 305, Food and Agricultural Marketing Principles AEC 305, Food and Agricultural Marketing Principles
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    Price Elasticity of Demand  Applications Policymaker  – “How much will  a tax increase on fast  food reduce consumption, impact tax revenues? Grocery Manager  --  If I offer a buy one get one free sale  on 12 packs of Pepsi, how many should I stock?” Fertilizer Dealer  – “How will higher fertilizer prices affect  sales and my revenues? Athletic Director  – “If we raise the price of football  tickets 10%, will we still have a sell-out? Farmer  – Will my total revenue be higher if I market my  pumpkins at $2.50,$5.00, or $10 each?
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    Quantity Response for a Given  Price Change Price Quantity P 2 P 1 Q 2 D 1 Q 1 Price Quantity P 2 P 1 Q 2 Q 1 D 2
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    Price Elasticity of Demand (cont.) Related to the sloped of the demand  equation (i.e. demand elasticities will be  negative … which sometimes leads to  one stating demand elasticities in  absolute value) AEC 305, Food and Agricultural Marketing Principles AEC 305, Food and Agricultural Marketing Principles
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    Price Elasticity of Demand If the absolute value of the price elasticity of  demand is equal to one – the demand schedule is  said to be  unitary If the absolute value of the price elasticity of  demand is less than one – the demand schedule 
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This note was uploaded on 01/13/2011 for the course AEC aec 305 taught by Professor Dr.williamm.snell during the Spring '10 term at Kentucky.

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Oct 12 Demand Elasticity - DemandElasticities(10/12/10)

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