ECON 1 Lecture Notes - Lecture 4: Demand Curve, Competitive Equilibrium
65 views2 pages
elihung and 37582 others unlocked
85
ECON 1 Full Course Notes
Verified Note
85 documents
Document Summary
= pq + p(dq) + (dp)q + q p p q. = old price + change in price)(old quantity +change in quantity) - pq. Quantity effect: gain in revenue because quantity increases. Gain in revenue because quantity increases - loss in revenue from price reduction. Delta r: (new revenue - original revenue) dr = dq + dp + dp*dq. Elasticity of demand is negative because demand is sloping downward. When quantity increases along the demand curve price is dripping. Usually use midpoint formula: average of the two. Two possibilities either the absolute value of the quantity effect is greater than the absolute value of the change in price . That means that elasticity of demand is less than -1 which means that the demand is eleastic. When absolute value of change in quantity/ quantity is less than the absolute value of price /p than 0 > ed > 1 demand is inelastic.
Get access
Grade+
$40 USD/m
Billed monthly
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers