2Lecture

2Lecture - S = supply Elasticity – measures the rate of responsiveness of consumers as a percentage change in price Elasticity of demand Percent

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Lecture 2 13:10 Question 3 page 20 How can we find out the value of certain amounts of profit? Present value of corporation in 10 years from now. p. 660 present value of a dollar Demand Theory To be successful you need to know your business demand There is individual and market demand In a perfect market price is given The market demand is the somewhat horizontal firms demand If you only have 3 firms then each firm has different quantity demanded at different  prices Market demand is the sum of the individual demands Important factors What are the consumer preferences or taste Consumer income or money income Price of other goods All forms of demand curves have the same characteristics The slope of variable shows the rate of change Qd = -700P + 200I + .01A – 500S I = income P = price A = advertising

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Unformatted text preview: S = supply? Elasticity – measures the rate of responsiveness of consumers as a percentage change in price. Elasticity of demand: Percent of change in demand as a result of one percent change in price Measures one percent change in price effects on demand Elasticity is the way we convert slope into percentage Slope = change of quantity/ change of price Elasticity = (change in Qp/Change in P) x (P/Q) If elasticity is -1.4 everything changes by -1.4 Demand elasticity is always negative because demand slope is downward sloping or negative. What is the range of the elasticity of the demand? 0 < elasticity < ∞ If goods can be easily substituted their elasticity is 0 Goods with no substitute have an undefined elasticity 13:10 13:10...
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This note was uploaded on 02/23/2012 for the course 373 421 taught by Professor Sani during the Spring '12 term at Rutgers.

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2Lecture - S = supply Elasticity – measures the rate of responsiveness of consumers as a percentage change in price Elasticity of demand Percent

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