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ECON 1101 Week 4

# ECON 1101 Week 4 - ECON 1101 Week 4 Elasticity Frank...

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Click to edit Master subtitle style 7/28/11 ECON 1101 – Week 4 Elasticity Frank, Jennings, and Bernanke: Ch 4 11

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7/28/11 22 Outline Defining price elasticity of demand Measuring price elasticity of demand Determinants of price elasticity of demand Graphical interpretation of price elasticity Calculating the price elasticity of demand Cross-price elasticity and income
7/28/11 Review the law of demand : quantity demanded is inversely related to the change in price as price rises, quantity demanded will fall.….but how much ? as price falls, quantity demanded will rise…. .but how much ? 33 Elasticity of Demand

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7/28/11 44 Price Elasticity A measure of the responsiveness of the quantity demanded of a good to a change in the price of that good.
7/28/11 Calculating Elasticity The price elasticity of demand is calculated by using the formula: Percentage change in quantity demanded Percentage change in price 55 Calculating Elasticity

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7/28/11 66 Price Elasticity Defined Elastic demand Demand is elastic with respect to price if price elasticity of demand is greater than 1 Inelastic demand Demand is inelastic with respect to price if price elasticity of demand is less than 1 Unit elastic demand Demand is unit elastic with respect to price if price elasticity of demand equals 1
7/28/11 77 Price Elasticity of Demand for Sushi Suppose: Price of sushi = \$2/piece

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ECON 1101 Week 4 - ECON 1101 Week 4 Elasticity Frank...

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