feb 16 - ELASTICITIES-Chapter 5 ECON 201 Textbook problems...

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ELASTICITIES-Chapter 5 ECON 201 Dr. Vanderporten Textbook problems page 125 1and 3 and page 134 1 and 2. I: PRICE ELASTICITIES OF DEMAND Price Type Change in Product Elast. Elast. Price TR %∆Q Q o Q 1 Cigarettes 0.45 Inel. P up by 10% Up -4.5% 100 95.5 Movies 1.00 Unit. P down by 5% Zero +5% 100 105.0 China 2.00 Elast. P up by 8% Down -16% 100 84.0 Demand Elasticity Short-run: 0.45 for Cigarettes Long-run: 0.80 E X = -% Qx = - Qx/mean of Q % Px Px/mean of P The change in quantity over the mean in quantity over the change in price over the mean in price. If the price in china goes up by 8% then the quantity falls 16%. Very elastic. P Q $2.00 109 E= - -18/100 = 2.5 (0.18) = 0.45 3.00 91 100/250 Price of elasticity will always be positive. Determinants of Price Elasticity 1. Close Substitutes a. Many: Elastic b. None: Inelastic 2. Share of Income a. Large: Elastic b. Small: Inelastic 3. Time Frame a. Short-run: Inelastic à not gonna spend a lot of time trying to find the better price, i.e. beer
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b. Long-run: Elastic
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This note was uploaded on 02/18/2011 for the course ECON 201 taught by Professor Cummings during the Spring '08 term at Loyola Chicago.

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feb 16 - ELASTICITIES-Chapter 5 ECON 201 Textbook problems...

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