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CHAPTER 2 SUPPLY AND DEMAND

# CHAPTER 2 SUPPLY AND DEMAND - ECON 306 CLASS HANDOUT SUPPLY...

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For Personal Use Only. Not For Circulation. © Charles R. Hulten 2010 ECON 306 CLASS HANDOUT SUPPLY AND DEMAND SLIDES \$40 \$10 10 70 X P X SUPPLY DEMAND \$40 \$10 10 70 X P X SUPPLY DEMAND AB C D

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For Personal Use Only. Not For Circulation. © Charles R. Hulten 2010 HOW SHOULD WE MEASURE THE STEEPNESS OF THE SUPPLY AND DEMAND FUNCTIONS? THE SLOPE s = ) Q/ ) P THE ELASTICITY ε = % ) Q / % ) P \$10 P D D' \$12 \$15 Q P LR SUPPLY SR SUPPLY 12 11 14 a b c
For Personal Use Only. Not For Circulation. © Charles R. Hulten 2010 POINT ELASTICITY OF DEMAND: ε = - % ) Q / % ) P = - [ ) Q/Q]/[ ) P/P] = - [ ) Q/ ) P]x[P/Q] ARC ELASTICITY OF DEMAND: 2 ) P + P ( ) P - P ( 2 X) + X ( X) - X ( - = E X * X X * X * * O

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For Personal Use Only. Not For Circulation. © Charles R. Hulten 2010 e 2 e 1 40 10 70 10 P X X 25 40 m % ) P + 120% % ) X - 150% ELAS + 1.25 ARC OWN PRICE X ELASTICITY OF DEMAND PT ELAST = 8 PT ELAST = 2/7 \$60 \$10 100 A B 200 P 1000 1000

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CHAPTER 2 SUPPLY AND DEMAND - ECON 306 CLASS HANDOUT SUPPLY...

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