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Unformatted text preview: 03:54 Teaser- In 2008, P(Wings)= $0..94 and P(chicken breast)= $1.15 In 2009, P(Wings)= 1.49, P(Chicken)= $ 1.21 Author of article blames recession. Potential reasons: Wings are an inferior good so an income drops, demand goes up. Note- Slope is absolute change; Elasticities are percent changes. Elasticity- % change in X= (X2-X1/X1+X2/2 ) 100 or change in Q/avg Q/Change in income/Avg income= ∆Q/∆I (I/Q)= dQ/dI (I/Q) Income elasticity- % change in Q/% change in income (Q= Quantity not quantity demanded because there is a shift in curve) [would be negative if inferior] Normal goods have positive income elasticity. Luxury goods are greater than 1 and necessities are less than 1. NOTE- In a linear demand curve, the mid point is unit elastic. (Elastic at the top; inelastic at the bottom). You can maximize revenue at the unit elastic point. Cross price elasticity-...
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This note was uploaded on 03/02/2011 for the course ECON 3010 taught by Professor Reynolds during the Spring '09 term at UVA.
- Spring '09