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Lecture 2

BUS 207 Lecture Notes - Lecture 2: Negative Number, Dependent And Independent Variables, Regression Analysis


Department
Business Administration
Course Code
BUS 207
Professor
Mark Moore
Lecture
2

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BUS 207: Chapter 3
Empirical Methods for Demand Analysis
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Elasticity
Price elasticity of demand: Is the percentage change in quantity demanded (Q) divided by
the percentage change in price (P).
Arc Price Elasticity: It is an elasticity that uses the average quantity, average price, as the
denominators for percentage calculations.
Point Elasticity:
***We can be given an inverse function of the original***
P = 10 - 1/2q ...... We cannot take the derivative of this...
Q = 20 - 2p ...... We rearranged the question above to isolate Q, quantity ... take derivative
SQ/SP = -2
Point Elasticity (WITH CALCULUS)
Elasticity Along the Demand Curve
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3 types of linear demand curves:
1. Downward-sloping
2. Horizontal
3. Vertical
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3 types of linear demand curves:
1. Downward-Sloping Linear Demand Curves
Elasticity varies along the demand curve.
Elasticity of demand is a more negative number the higher the price and hence the
smaller the quantity.
2. Horizontal Demand Curves
If the price increases, even slightly, demand falls to zero.
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