ECN 104 Lecture Notes - Lecture 6: High Cross, Economic Equilibrium
13 Oct 2016
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Introductory microeconomics (week 6) ( elasticity and tax incidence, consumer choice and utility maximization) Price ceiling (below equilibrium results in shortage and price floor(above equilibrium results in surplus)= shortages/surplus. Reproductions: more elastic supply (e. g replica paintings, copying files. Inelastic supply + higher demand= higher price repetitively). Price goes up (but not as much because increasing quantity and has more incentive) Gold: many uses: jewellery, coins, financial investment. Demand: more elastic (larger number of buyers) Relatively small changes in demand produces relatively large changes in price. Exy= percentage change in quantity demanded of product x. Percentage change in the price of product y. Substitute is cheaper you have less quantity x (numerator goes down) (negative & negative = positive) Example: cross elasticity of demand: applications: coke vs. sprite. How sensitive are the sales of coke to a change in the price of sprite: low cross elasticity. A lower price of sprite would have little effect on coke sales.
