ECON 142 Week 5 Notes!
Popular in Microeconomics
Popular in Economics
verified elite notetaker
This 3 page Class Notes was uploaded by Noah Johnston on Thursday September 22, 2016. The Class Notes belongs to Econ 142 at Kansas taught by Dr. Brian Staihr in Fall 2016. Since its upload, it has received 14 views. For similar materials see Microeconomics in Economics at Kansas.
Reviews for ECON 142 Week 5 Notes!
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 09/22/16
ECON 142 Week 5 Notes Chapter 6 Price Elasticity: RESPONSIVENESS The bigger change in demand when price changes, the more elastic demand is. If the price changes, and you buy the same amount you were going to buy anyway, you didn’t respond. Your demand is not responsive or elastic. If price changes and you buy a little more or little less than what you were going to, then you were somewhat responsive and elastic. If the price changes and you buy a lot more or a lot less, then you have a very responsive and very elastic demand We care because we can determine if we’ll make more money selling more units at lower price or lesser units at higher price. It’ll also determine how much margin/profit we’ll make on a product. THINGS THAT MAKE A PRODUCT ELASTIC 1. number of substitutes (lot of substitutes=elastic) 2. luxury or necessity (luxury tends to be elastic) 3. how broadly the market is defined (broadly=elastic) for example, a flight to New York is broad. a flight to Boston on a Friday at five is narrow. 4. size of good in consumer’s budget (large part of budget=elastic) 5. The amount of time one has to adjust to the price change (a lot of time=elastic) REMEMBER: If demand is elastic and price is lowered, make more if demand is elastic and price is raised, lose money if demand is inelastic and price is lowered, make less if demand is inelastic and price is raised, make more Price in elasticity = Percent Change in Quantity Demanded --------------------------------------------- Percent Change in Price We can calculate elasticity if we know these 4 things: 1. original price 2. new price 3. original quantity demanded 4. new quantity demanded take change in quantity, then average quantity. then do the same thing with the price. change in quantity demanded ------------------------- average quantity demanded ————————————————— change in price ————— average price If we get a number lower than 1, demand is inelastic. Over 1 = elastic. USING ELASTICITY % change in quantity demanded ———————————— = Elasticity % change in price Elasticity is not slope. Elasticity can change on the same demand curve, while slope can’t Cross Price Elasticity two different goods. Basically asks the question, how does the quantity demanded of X change when the price of Y changes? if two goods are subs, cross price elasticity is positive. if they are complements, elasticity is negative.
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'