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Unformatted text preview: 525. Because the increase in quantity supplied of 5% is smaller than the increase in price of 22%, the supply curve is inelastic in this rage. P Elasticity is small (<1) $15
Elasticity is large (>1)
3 0 100 200 500 525 Q Discussion1:
Discussion1: What happens to wheat farmers and the market for wheat when university agronomists discover a new wheat hybrid that is more productive than existing varieties? Can good news for farming be bad news for farmers? Total Revenue and the Price
Elasticity of Demand
Elasticity total revenue the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold.
P×Q Rule: when demand is inelastic, price and total revenue move in the same direction.
When demand is elastic, price and total revenue move in the opposite direction.
If demand is unit elastic, total revenue remains constant when the price changes. Total Revenue
1.How total Revenue Changes When Price Changes: Inelastic Demand Price $4
P×Q=$400 P Demand revenue
0 Q 100 Quantity 2.How total Revenue Changes When Price Changes: Elastic Demand Elasticity and Total Revenue along
a linear Demand Curve
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This note was uploaded on 12/06/2011 for the course BUSINESS Finance taught by Professor Qiuxin during the Summer '11 term at Nanjing University.
- Summer '11