101 lecture 5
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MicroeconomicsChapter 5
Elasticity
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Shift in the Demand CurvePrice does not
change
demand curve shifts
quantity demandedchanges
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Movement or Shift?
Variable Change Movement Shift
Price
Income
Related Goods
Tastes
Population and Demographics
Expectations
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elasticityprice elasticity of demandtotal revenuetotal expenditureincome elasticity of demandcross-price elasticity of demandprice elasticity of supply
Key Terms
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ELASTICITY EQUATION BENCHMARK
Price Elasticity of Demand
Cross-PriceElasticity
IncomeElasticity
Price Elasticityof Supply
MidpointFormula
Inelastic | Elastic 1
Compliments | Substitutes 0
Inferior | Normal | Luxury 0 1
Inelastic | Elastic 1
%∆QD%∆P
%∆QS%∆P
%∆QD1
%∆P2
%∆QD%∆I
∆Q∆PQPx
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Elasticity
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Elasticity
If I change one thing does another thing also change?
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Elasticity
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ElasticityA measure of how muchone economic variable
respondsto changes in
another economic variable
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Percentage Change
%
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Percentage Change
%
New - OldOld
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Percentage Change
%
New - OldOld
Ignore units in the scale
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Scales can be deceptive
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$0
$1.00
$2.00
$3.00
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$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
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$0
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$20.00
$30.00
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$60.00
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$90.00
$100.00
3 4.5 6
Gallons - Gasoline
Price
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Demand Schedule
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Demand Schedule
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Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
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Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
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Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
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Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
Total RevenueCurve
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Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
Total RevenueCurve
TotalRevenue
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Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
Total RevenueCurve
TotalRevenue
Price Per Pizza
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Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
Total RevenueCurve
10 20 30 40 50 60 70 80 900
60
120
180
240
300TotalRevenue
Price Per Pizza
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Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
Total RevenueCurve
10 20 30 40 50 60 70 80 900
60
120
180
240
300TotalRevenue
Price Per Pizza
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Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
Total RevenueCurve
10 20 30 40 50 60 70 80 900
60
120
180
240
300TotalRevenue
Price Per Pizza
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Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
Total RevenueCurve
10 20 30 40 50 60 70 80 900
60
120
180
240
300TotalRevenue
Price Per Pizza
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Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
Total RevenueCurve
10 20 30 40 50 60 70 80 900
60
120
180
240
300TotalRevenue
Price Per Pizza
![Page 66: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/66.jpg)
Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
Total RevenueCurve
10 20 30 40 50 60 70 80 900
60
120
180
240
300TotalRevenue
Price Per Pizza
![Page 67: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/67.jpg)
Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
Total RevenueCurve
10 20 30 40 50 60 70 80 900
60
120
180
240
300TotalRevenue
Price Per Pizza
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Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
Total RevenueCurve
10 20 30 40 50 60 70 80 900
60
120
180
240
300TotalRevenue
Price Per Pizza
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Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
Total RevenueCurve
10 20 30 40 50 60 70 80 900
60
120
180
240
300TotalRevenue
Price Per Pizza
![Page 70: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/70.jpg)
Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand Schedule
Total RevenueCurve
10 20 30 40 50 60 70 80 900
60
120
180
240
300TotalRevenue
Price Per Pizza
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Price Elasticity of Demand
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Price Elasticity of Demand
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Price Elasticity of Demand
%%
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Price Elasticity of Demand
%%
QD
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Price Elasticity of Demand
%%
QD
P
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Price Elasticity of Demand
%%
QD
P
Percentage Change in Quantity Demanded
Percentage Change in Price
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Price Elasticity of Demand
1
ElasticInelastic
<1 >1
1. Calculate Elasticity2. Take Absolute Value3. Compare to benchmark of 1
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Price
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%QD %P
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Price
%QD %P
(4-5)÷5
(6-3)÷3
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Price
%QD %P
(4-5)÷5
(6-3)÷3
-.21
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Price
%QD %P
(4-5)÷5
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-.21
.2
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Price
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Price
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Price Increase
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Price
%QD %P
(3-5)÷5
(4-3)÷3
-.4.33
Price Increase
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-.4.33
1.2
Price Increase
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Price
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Price Decrease
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Price
%QD %P
(5-3)÷3
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Price Decrease
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Price
%QD %P
(5-3)÷3
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.66-.25
Price Decrease
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Price
%QD %P
(5-3)÷3
(3-4)÷4
.66-.25
2.67
Price Decrease
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MidpointFormula
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Midpoint Formula
Q
QPP
![Page 109: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/109.jpg)
Midpoint Formula
Delta Qover
Q Bar
Q
QPP
![Page 110: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/110.jpg)
Midpoint Formula
Delta Qover
Q Bar
Delta Pover P Bar
Q
QPP
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Midpoint Formula
Q
QPP
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Midpoint Formula
Q
QPP
Trick: Flip denominator and multiply
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Midpoint Formula
Q
QP
P
Trick: Flip denominator and multiply
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Midpoint Formula
Q
Q PP
Trick: Flip denominator and multiply
X =
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Price
Midpoint Formula
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Midpoint Formula
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Price
Midpoint Formula
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Gallons - Ice Cream
Price
Midpoint Formula
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Price
Midpoint Formula
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Gallons - Ice Cream
Price
Midpoint Formula
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Gallons - Ice Cream
Price
Midpoint Formula
Q Q P
P x
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Gallons - Ice Cream
Price
Midpoint Formula
Q Q P
P x
24 1
3.5x
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Price
7
4
Midpoint Formula
Q Q P
P x
24 1
3.5x
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Price
7
4
1.75
Midpoint Formula
Q Q P
P x
24 1
3.5x
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What determinesPrice Elasticity of
Demand?
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Close Substitutes
Passage of Time
Luxuries vs. Necessities
Definition of Market
Share of Budget
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Close Substitutes
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Close Substitutes
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Close Substitutes
Elastic >1
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Close Substitutes
Elastic >1
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Close Substitutes
Elastic >1
Inelastic <1
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Passage of Time
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Passage of Time
More TimeMore Elastic
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Luxuries vs. Necessities
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Luxuries vs. Necessities
Elastic
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Luxuries vs. Necessities
Elastic Inelastic
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Definition of Market
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Definition of Market
Elastic
![Page 139: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/139.jpg)
Definition of Market
Elastic Inelastic
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Definition of Market
Elastic Inelastic
Demand for Gasoline in General
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Definition of Market
Elastic Inelastic
Demand for Gasoline in General
Demand for Gasoline in Rexburg
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Share of the BudgetSmall Large
![Page 143: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/143.jpg)
Share of the Budget
Inelastic
Small Large
![Page 144: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/144.jpg)
Share of the Budget
ElasticInelastic
Small Large
![Page 145: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/145.jpg)
Price Elasticity and
Total Revenue
![Page 146: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/146.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
Total RevenueTR = P x Q
![Page 147: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/147.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
Total RevenueTR = P x Q
![Page 148: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/148.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
Total RevenueTR = P x Q
![Page 149: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/149.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
$3.00 x 5 = $15
Total RevenueTR = P x Q
![Page 150: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/150.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price$6.00 x 4 = $24
$3.00 x 5 = $15
Total RevenueTR = P x Q
![Page 151: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/151.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price$6.00 x 4 = $24
$3.00 x 5 = $15
Lose
Total RevenueTR = P x Q
![Page 152: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/152.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price$6.00 x 4 = $24
$3.00 x 5 = $15
Lose
Gain
Total RevenueTR = P x Q
![Page 153: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/153.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price$6.00 x 4 = $24
$3.00 x 5 = $15
Net Gain = $9
Lose
Gain
Total RevenueTR = P x Q
![Page 154: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/154.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price$6.00 x 4 = $24
$3.00 x 5 = $15
Inelastic (<1)Raising prices will increase total revenue
Net Gain = $9
Lose
Gain
Total RevenueTR = P x Q
![Page 155: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/155.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Total RevenueTR = P x Q
![Page 156: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/156.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Total RevenueTR = P x Q
![Page 157: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/157.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Total RevenueTR = P x Q
![Page 158: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/158.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
$3.00 x 5 = $15
Total RevenueTR = P x Q
![Page 159: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/159.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price$4.00 x 3 = $12
$3.00 x 5 = $15
Total RevenueTR = P x Q
![Page 160: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/160.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price$4.00 x 3 = $12
$3.00 x 5 = $15
Lose
Total RevenueTR = P x Q
![Page 161: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/161.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price$4.00 x 3 = $12
$3.00 x 5 = $15
Lose
Gain
Total RevenueTR = P x Q
![Page 162: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/162.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price$4.00 x 3 = $12
$3.00 x 5 = $15
Net Gain = -$3
Lose
Gain
Total RevenueTR = P x Q
![Page 163: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/163.jpg)
$0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price$4.00 x 3 = $12
$3.00 x 5 = $15
Elastic (>1)Raising prices will decrease total revenue
Net Gain = -$3
Lose
Gain
Total RevenueTR = P x Q
![Page 164: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/164.jpg)
Cross-Price Elasticity of Demand
![Page 165: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/165.jpg)
Cross-Price Elasticity of Demand
%%
QD
P
![Page 166: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/166.jpg)
Cross-Price Elasticity of Demand
%%
QD
P1
![Page 167: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/167.jpg)
Cross-Price Elasticity of Demand
%%
QD
P1
2
![Page 168: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/168.jpg)
Cross-Price Elasticity of Demand
Percentage Change in Quantity Demanded of one good
Percentage Change in Priceof another good
%%
QD
P1
2
![Page 169: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/169.jpg)
Cross-Price Elasticity of Demand
0
SubstitutesCompliments
<0 >0
1. Calculate Elasticity2. Compare to benchmark of 0
![Page 170: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/170.jpg)
%%
QD1
P2
![Page 171: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/171.jpg)
%%
QD1
P2 50%
![Page 172: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/172.jpg)
%%
QD1
P2
35%
50%
![Page 173: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/173.jpg)
%%
QD1
P2
35%
50%=.7
![Page 174: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/174.jpg)
%%
QD1
P2
35%
50%=.7 >0
![Page 175: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/175.jpg)
%%
QD1
P2
35%
50%=.7 >0
Substitutes
![Page 176: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/176.jpg)
%%
QD1
P2
![Page 177: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/177.jpg)
%%
QD1
P2 50%
![Page 178: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/178.jpg)
%%
QD1
P2
-40%
50%
![Page 179: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/179.jpg)
%%
QD1
P2
-40%
50%=-.8
![Page 180: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/180.jpg)
%%
QD1
P2
-40%
50%=-.8 <0
![Page 181: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/181.jpg)
%%
QD1
P2
-40%
50%=-.8 <0
Compliments
![Page 182: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/182.jpg)
Cross-Price Elasticity of Demand
0
SubstitutesCompliments
<0 >0
%%
QD
P1
2
![Page 183: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/183.jpg)
IncomeElasticity of Demand
Normal, Inferior, or Luxury?
![Page 184: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/184.jpg)
Percentage Change in Quantity Demanded
Percentage Change in Income
IncomeElasticity of Demand
%%
QD
I
![Page 185: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/185.jpg)
IncomeElasticity of Demand
0
LuxuryInferior
<0 >1
1. Calculate Elasticity2. Compare to benchmark of 0 and 1
1
Normal
![Page 186: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/186.jpg)
%%
QD
I
![Page 187: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/187.jpg)
%%
QD
I 20%
![Page 188: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/188.jpg)
%%
QD
I
10%
20%
![Page 189: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/189.jpg)
%%
QD
I
10%
20%=.5
![Page 190: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/190.jpg)
%%
QD
I
10%
20%=.5
>0<1
![Page 191: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/191.jpg)
%%
QD
I
10%
20%=.5
>0<1
Normal
![Page 192: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/192.jpg)
%%
QD
I
![Page 193: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/193.jpg)
%%
QD
I 20%
![Page 194: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/194.jpg)
%%
QD
I
-50%
20%
![Page 195: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/195.jpg)
%%
QD
I
-50%
20%=-2.5
![Page 196: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/196.jpg)
%%
QD
I
-50%
20%=-2.5 <0
![Page 197: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/197.jpg)
%%
QD
I
-50%
20%=-2.5 <0
Inferior
![Page 198: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/198.jpg)
%%
QD
I
![Page 199: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/199.jpg)
%%
QD
I 20%
![Page 200: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/200.jpg)
%%
QD
I
100%
20%
![Page 201: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/201.jpg)
%%
QD
I
100%
20%= 5
![Page 202: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/202.jpg)
%%
QD
I
100%
20%= 5 >1
![Page 203: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/203.jpg)
%%
QD
I
100%
20%= 5 >1
Luxury
![Page 204: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/204.jpg)
IncomeElasticity of Demand
0
LuxuryInferior
<0 >11
Normal
%%
QD
I
![Page 205: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/205.jpg)
Price Elasticity of Supply
![Page 206: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/206.jpg)
Price Elasticity of Supply
%%
![Page 207: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/207.jpg)
Price Elasticity of Supply
%%
QS
![Page 208: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/208.jpg)
Price Elasticity of Supply
%%
QS
P
![Page 209: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/209.jpg)
Price Elasticity of Supply
%%
QS
P
Percentage Change in Quantity Supplied
Percentage Change in Price
![Page 210: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/210.jpg)
Price Elasticity of Supply
1
ElasticInelastic
<1 >1
1. Calculate Elasticity2. Compare to benchmark of 1
![Page 211: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/211.jpg)
%%
QS
P
![Page 212: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/212.jpg)
%%
QS
P 20%
![Page 213: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/213.jpg)
%%
QS
P
10%
20%
![Page 214: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/214.jpg)
%%
QS
P
10%
20%=.5
![Page 215: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/215.jpg)
%%
QS
P
10%
20%=.5 <1
![Page 216: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/216.jpg)
%%
QS
P
10%
20%=.5 <1
Inelastic
![Page 217: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/217.jpg)
%%
QS
P
![Page 218: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/218.jpg)
%%
QS
P 20%
![Page 219: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/219.jpg)
%%
QS
P
40%
20%
![Page 220: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/220.jpg)
%%
QS
P
40%
20%= 2
![Page 221: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/221.jpg)
%%
QS
P
40%
20%= 2 >1
![Page 222: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/222.jpg)
%%
QS
P
40%
20%= 2 >1
Elastic
![Page 223: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/223.jpg)
Price Elasticity of Supply
1
ElasticInelastic
<1 >1
%%
QS
P
![Page 224: 101 lecture 5](https://reader034.vdocuments.net/reader034/viewer/2022042714/54baa9ac4a79590b528b489d/html5/thumbnails/224.jpg)
1. Prices increase from $5.00 to $6.00. Quantity demanded decreases from 100 units to 80 units.
What is the price elasticity of demand?Midpoint Formula
What is the total revenue at $5.00 per unit?
$5 x 100 = $500
What is the total revenue at $6.00 per unit?
$6 x 80 = $480
∆Q∆PQPx 20
1905.50x 1.22110
90= = =