This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: o =(Qd/Qd = prop. Qd ) / (P/P= prop. P Rule # 2: for reference levels of P + Qd, use average (midpoint) P from 90 cents to $1.10 From 90 cents to 110 cents Qd from 1.05 million to 0.95 milion E=(Qd/ Qd) /(P/P) = (0.1/1.0)/(20/100)=(0.1/0.2) = 0.5 P from $ 1.10 to $1.30 Qd from 0.95 M to 0.85 M Straight line along straight-line D curve, elast. not constant E= (1/9)/(1/6)=(6/9)=2/3 o E= % Qd/%P=0 o perfectly inelastic o %Qd < %P o E=(%Qd)/(%P)<1 o 0<e<1 o inelastic but not perfectly o % Qd/%P=1 unit elastic o Responsive %Qd>%P o elastic o A small firm with small share of market o E=%Qd/%P o perfectly elastic...
View Full Document