Say we have two goods i gasoline gallon session 22 ii

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Unformatted text preview: can we quantify demand? The total revenue equals the price times the demand for the good. Total Revenue = TR = PD Why quantifying this relationship can be hard to do? Say we have two goods. i. Gasoline (gallon) Session 22 ii. IE 545 Fall 2013 Scribe: Parithi Govindaraju an SUV Suppose we reduce the price of each by $1. a) Then we get quite different changes in demand b) Different goods are measured in different quantities. Coefficient of Demand Elasticity (Price Elasticity of Demand) E= −% Change in Demand % Change in Price The negative sign is to ensure that E ≥ 0 ( text does not do this) If E > 1 , we call the demand elastic (TR increases) If E = 1 , we call the demand unitary (TR is constant) If E < 1 , we call the demand inelastic...
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This document was uploaded on 11/21/2013.

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