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Econ – September 30.docx

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Department
Economics
Course
ECON101
Professor
All Professors
Semester
Fall

Description
Econ – September 30 midterm up until todays material (next Thursday) Today: Elasticity of Demand, total revenue rule, policy application, other elasticities Elasticities of Supply and Demand: Price Elasticity of Demand – measures the responsiveness of quantity demanded to a  change in the price, measurement along a demand curve Eta subscript d  = % change in quantity demanded / %change in price Or the Arc elasticity formula (midpoint fomula) Eta subscript d = change….. Or point elasticity formula..(when change in price is very small and you have the demand  curve formula) ­The elasticity of demand is usually a negative number.  However, we often drop the  negative sign (absolute value it).  So, you will see the elasticity of demand written as a  positive number. ­The elasticity of demand generally changes as we move along a demand curve. ­When elasticity of demand > 1, demand is elastic, quantity is relatively responsive to  price changes.  ­When elasticity of demand 
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