Econ1-Fall2010-04a-Elasticity-handout - Readings Economics1

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Economics 1 rinciples of Microeconomics Principles of Microeconomics 4. Elasticity (A) Fall 2010 Herb Newhouse 1 eadings Readings h : Elasticity 7 9) Ch 4: Elasticity (p 97 99) Price Elasticity of Demand 2 utline Outline lasticity Elasticity. Trouble with Slope. Formula. Example. 3 lasticity Elasticity onsider two similar markets Consider two similar markets. Both have identical supply. he two demands have different The two demands have different “responsiveness”. oth supply curves shift identically Both supply curves shift identically. How do the equilibrium prices and quantities q p q change? 4
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lasticity Elasticity P S P S S’ S’ D D Q Q 5 he Trouble with Slope The Trouble with Slope he first guess for the explanation is that the The first guess for the explanation is that the difference is caused by different slopes of the emand curves demand curves. Right idea but slope is not the appropriate easure. measure. Easy way to see this is by changing the units.
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This note was uploaded on 06/12/2011 for the course CS 1 taught by Professor Staff during the Fall '08 term at Cornell University (Engineering School).

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Econ1-Fall2010-04a-Elasticity-handout - Readings Economics1

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