microbook_3e-page48 - Why elasticity is so useful U.S 23...

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Why elasticity is so useful 3 2 İ U.S. 0 2/3 İ Britain 0 x How much less milk would be demanded in each country if the price rose 1% in each country? 0.67% less x Now this result may seem trivial, but that’s the point! x You want an easy way to make comparisons. x You don’t want to have to convert U.S. Dollars into British Pounds or gallons into liters, etc. x So for example, if I told you that: o own-price elasticity of demand for gasoline is –0 . 5 and o own-price elasticity of demand for restaurant meals is –2 . 3 x which is more responsive to changes in price? The demand for gasoline or the demand for restaurant meals? x the demand for restaurant meals – because for a one percent increase in price, the quantity of restaurant meals demanded falls over four times more than the quantity of gasoline demanded does Now let’s say you’re selling cream cheese … x If there are many other companies selling cream cheese, then how
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