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Microecon 4

# Microecon 4 - February 2nd 2012 Lecture 4 Today finish...

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February 2 nd , 2012 : Lecture 4 Today: finish government intervention then start: Price Elasticity of Demand I. Concept of Elasticity Law of demand: price of good goes up, Qd goes down ; but how much quantity would go down? Need to figure out how sensitive it is II. Calculation Elasticity: percent change in one variable caused by a given change in some other variable Price elasticity of demand: change in Quantity demanded/ percent change in the price of the good (this will always have a negative sign BUT for now make it positive) Percent change of of caused nu percent change in price III. Categories of Elasticity IV. Determinants of Elasticity V. Elasticity and Total Revenue February 7 th , Lecture #5 elasticity: synonym for price sensitivity Categories of Demand: Elastic demand: Ed >1 Price elasticity is a fraction Ex: 1% increase in price then quantity demanded will be greater than 1% Significant amount of price sensitive Inelastic demand: Ed<1 Fraction is smaller than 1 Price goes up 1% then quantity demanded goes less than 1% Insensitive demand; demand is not sensitive Unit-elastic demand: Ed=1

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Microecon 4 - February 2nd 2012 Lecture 4 Today finish...

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