ECO 1104 Lecture Notes - Lecture 10: Normal Good, Inferior Good, Demand Curve
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ECO 1104 Full Course Notes
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% change in qx / % change in px. % change in qx / % change in income(y) %change in qx / % change in price(z) Captures the relationship between good x and good z - whether they are substitutes or complements or neither. Top section - generally more elastic (quantity demanded responds more to change in price. ) Low section - inelastic (quantity demanded responds less to change in price. ) When computing price elasticity, take the absolute value because there is always a negative relation between demand and change in price. Total revenue is calculated using: uantity demanded x price. Elastic - demands that have elasticity benefit more by reducing the price because the proportionate decrease in price will be less than the proportionate increase in quantity demanded. Increase price: loss in revenue will be more than the increase in revenue will be less than the decrease in quantity demanded. (total revenue goes up)