CH-5 PPT

# CH-5 PPT - Chapter5 Elasticity and its Application...

This preview shows pages 1–11. Sign up to view the full content.

Elasticity and its Application M icroeconomics P R I N C I P L E S   O F P R I N C I P L E S   O F N. Gregory Mankiw N. Gregory Mankiw Chapter 5

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Price Elasticity of Demand The price elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price.
PRICE QUANTITY DEMANDED \$40 250 \$30 450 \$20 675 \$10 825

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Calculating Elasticity of Demand Quantity rises from 250 to 450 Change in quantity = 200 Average quantity = 350 % change in quantity = (200/350) x 100 Price falls from \$40 to \$30 Change in price = \$10 Average price = \$35 % change in price = (10/35) x 100 Elasticity = (200/350)/(10/35) = 2.0
PRICE QUANTITY DEMANDED \$40 250 \$30 450 \$20 675 \$10 825

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Price Quantity D P Q 1 1 P 2 Q 2 Inelastic Demand
Price Quantity D P 1 P 2 Perfectly Inelastic Demand Q 1 Q 1 = Q 2

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Price Quantity D P Q 1 1 P 2 Q 2 Elastic Demand
Price Quantity D P 1 P 2 Perfectly Elastic Demand =

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Expenditure = Price x Quantity
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 11/05/2011 for the course BMGT 220 taught by Professor Bulmash during the Spring '08 term at Maryland.

### Page1 / 27

CH-5 PPT - Chapter5 Elasticity and its Application...

This preview shows document pages 1 - 11. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online