Econ 202 notes Week 6
Econ 202 notes Week 6 ECON 202
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This 2 page Class Notes was uploaded by Leslie Pike on Tuesday March 1, 2016. The Class Notes belongs to ECON 202 at Western Kentucky University taught by Dean Jordan in Spring 2016. Since its upload, it has received 30 views. For similar materials see PRIN ECONOMICS-MICRO in Economcs at Western Kentucky University.
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Date Created: 03/01/16
Econ 202 notes W eek 6 Announcements: Class is cancelled Thursday. The article report is due under his door at 2 p.m. Thursday. Exam grades are posted. Talk to Dr. Jordan if you got a bad grade and need to bring it up. Chapter 4: Elasticity Price elasticity of demand is the responsiveness of quantity demanded to a price change when all other factors remain the same. The elasticity can be computed as follows: %Change∈Quantitydemanded Elasticityof Demand= %Change∈Price %Change in quantity demanded is calculated by: Change∈quantitydemanded %Change∈Quantitydemanded= Averagequantitydemanded %Change in price is calculated by: Change∈price %Change∈price= Average price The resulting number is a unitless ratio. If the number is greater than 1, demand is elastic. If the number equals 1, demand is unit elastic. If the number is less than 1, demand is inelastic. Inelastic: price has little effect on quantity demanded. Ex. Necessity items, such as food, insulin for a diabetic, drugs for an addict, etc. tend to be inelastic. You need them so badly you’ll buy them regardless of price. Elastic: price has much effect on quantity demanded. Ex. Unnecessary items, or items where the market is full of competitors. Cell phones are elastic; Apple smartphones can be substituted for other smartphones, and customers want to buy the cheapest product. Raise your price, and the customers go to your competitor. Expensive vehicles are elastic; raise the price too much and people can’t afford them and will buy cheaper vehicles.
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