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Lecture 28

ECON 1010 Lecture 28: Lecture 28

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ECON 1010
Laura K.Brown

lc78 1. The steeper the demand curve that passes through a given point, the smaller the price elasticity of demand – inelastic 2. Zero elasticity of demand is perfectly inelastic and the demand curve is vertical o Price can change, but quantity demanded states the same o Ex: heroin, water 3. As the elasticity rises, the demand curve gets flatter and flatter 4. Perfect elastic as the price elasticity of demand approaches infinity and the demand curve becomes horizontal, reflecting the fact that very small changes in the price lead to high changes in the quantity demanded 5. Inelastic curves look like “I” 6. Elastic curves look like “E” Total Revenue and the Price Elasticity of Demand: 1. Total revenue: the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold (PXQ) 2. Vertical axis is price (P) and horizontal axis quantity (Q) 3. If demand is inelastic, then an increase in the price causes and increase in the total revenue 4. If demand is elastic, an increase in t
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