Discussion Notes Week 6
Discussion Notes Week 6 APEC 1101
U of M
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This 2 page Class Notes was uploaded by Madison Rude on Friday February 27, 2015. The Class Notes belongs to APEC 1101 at University of Minnesota taught by Tade Okediji in Spring2015. Since its upload, it has received 186 views. For similar materials see 1101 in Economcs at University of Minnesota.
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Date Created: 02/27/15
Discussion Notes 22715 Price Elasticity of demand E d AE quantity demanded AE price EX 1 Price of coffee increases by 2 Then Qd of coffee decreases by 4 change point method 962 961 x100 change in x x1 EX 2 Price of a movie ticket in last month was 10 But in this month it increased to 11 change in price from last month to this month 11 10 1 1 1 1 10 X 00 10X 00 0 Group A The of people who bought the ticket last month was 100 This month was 80 80 100 AE d 1 2 Q 100 x00 0 Ed 20 22 10 Group A elasticity is 2 Group B The of people who bought tickets last month was 100 For this month it was 95 95 100 1 100 x00 5 Aede 5 Ed 2 10 5 5 Group B elasticity is 5 Rule of Thumb AeQd lEdl AEP Edgt1 Elastic IEdI1 Unit elastic Edlt1 Inelastic What is Group A Group A is elastic What is Group B Group B is inelastic Determinants of Price Elasticity 1 Whether the good is a necessity or a luxury can determine the price elasticity 2 Substitute availability more subs bigger elasticity 3 Price of the good relative to income big portion of income bigger elasticity 4 Time horizon longer time to adjust to price change bigger elasticity
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