ECN 104 Lecture Notes - Lecture 4: Demand Curve, Normal Good, Inferior Good

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31 Mar 2016
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Price elasticity of demand: the ratio of the percent change in the quantity demanded to the percent change in the price as we move along the demand curve. High elasticity: highly influenced by the change in price. Price elasticity of demand= % change in quantity demanded/ % change in price. Perfectly inelastic: when the quantity demanded does not respond at all to changes in the price. When demand is perfectly inelastic the demand curve is a vertical line. Perfectly elastic: when any price increases it will cause the quantity demanded to drop to zero. When demand is perfectly elastic, the demand curve is a horizontal line. It will predict how changes in the price of a good will affect the total revenue earned by producers from the sale of that good. Total revenue: defined as the total value of sales of a good or service.

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