Week%204%20Edited%20Session%202%202009

# Week%204%20Edited%20Session%202%202009 - Microeconomics 1...

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Diane Enahoro Session 2 2009 1 Microeconomics 1 Econ 1101 Week 4: Groups A and B Elasticity Text: Ch 4, start Ch 5 Outline: The first 30 minutes of this lecture will be a workshop on how to write a short answer 1. Price Elasticity of Demand – Definition and Measurement 2. Calculation – Point and Arc Elasticity 3. Elasticity and the Slope of the Demand Curve 4. Determinants of Elasticity 5. Elasticity and Revenue/Expenditure 6. Other Types of Elasticity of Demand 7. Elasticity of Supply

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Diane Enahoro Session 2 2009 2 Who needs to know about elasticity and why? 1. Governments i. for tax policy ii. pricing of public utilities 2. Businesses i. Pricing policies ii. Investment opportunities Can you think of any others?
Diane Enahoro Session 2 2009 3 Elasticity: Definition: A measure of the responsiveness of one variable to changes in another. Price Elasticity of Demand for a good/service is the percentage change in the quantity demanded of that good/service that results from a one- percent change in its price. E = % Δ Qx % Px Elasticity of demand is negative but we use the absolute value of elasticity.

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Diane Enahoro Session 2 2009 4 Calculating Price Elasticity of Demand 1. Arc (average or mid-point) elasticity Assume a linear relation ship with two price and quantity observations.
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Week%204%20Edited%20Session%202%202009 - Microeconomics 1...

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