Notes Week 4
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This 3 page Class Notes was uploaded by Rodney Wines on Sunday September 20, 2015. The Class Notes belongs to ECON 1123 at University of Oklahoma taught by Clark in Summer 2015. Since its upload, it has received 61 views. For similar materials see Principles of Economics: Microeconomics in Economcs at University of Oklahoma.
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Date Created: 09/20/15
Economics Micro Notes Week 4 Class Notes from Dates 914 and 9 16 I Elasticity A Elasticity a measure of responsiveness B Price Elasticity of Demand is a measure of how responsive buyers are to changes to price Ceteris Paribus ED Percentage change in Quantity Demanded Percentage change in Price or ED A in QD A in P C Three Possibilities 1 ED gt 1 Demand is Elastic People are responsive to price change A in QD gt in P 2 ED lt 1 Demand is Inelastic People are unresponsive to price change A in QD lt AP 3 ED 1 Unitary Elastic A Q1 A P D Relationship between ED and total revenue TR 1 TE is Total Expenditure 2 TR is Total Revenue TR Price per Unit X Number of units or TR P X Q 3 TRP X Q From the Perspective of the Seller 4 TE P X Q From the Perspective of the Buyer 1 If ED lt 1 Inelastic then Prices P and TRTE changes in the same direction 2 If ED gt 1 Elastic The prices and TRTE change in opposite directions E Consider 2 Possibilities 1 ED0 Perfectly Inelastic or Totally Unresponsive Flerfertl1uur II39IEIEIEtiC 139 Q 2 ED 00 Perfectly Elastic or Totally Responsive 1 Free 5339 EH 0 unti r F Determinates of ED G Determinates of Demand 1 Numbers of Substitutes 2 Price as a fraction of buyers income 3 Time Period to adjust to price a price change A Time i Shorter Time period is More Elastic ii Longer Time Period is less elastic