18_(elasticity)_ - 10/13/11 Elasticity...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
10/13/11 Elasticity Price Elasticity of Demand Price elasticity of demand  measures how much  Qd  responds to a change in  P . Loosely speaking, it measures buyers’ price sensitivity. Types of Demand Curves The price elasticity of demand is closely related to the slope of the demand  curve. Rule of thumb : The flatter the curve, the greater the price elasticity of  demand. The steeper the curve, the smaller the price elasticity of demand. Calculating Percentage Change To calculate percentage change, we use the  midpoint method : [ (end value – start value)/ midpoint ] x 100% 10/18/11 Elasticity Continued So, if price increases from $200 to $250, would total revenue rise or fall? Total Revenue =  A price increase has two effects on revenue: Higher  means more revenue on each unit you sell. But you sell fewer units (lower 
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

18_(elasticity)_ - 10/13/11 Elasticity...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online