MGEA01H3 Lecture Notes - Lecture 6: Marginal Revenue, Normal Good, Inferior Good
DepartmentEconomics for Management Studies
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Elatic- the percentage change in quantity is greater then the
percentage change in price.
Maple Leaf tickets are inelastic.
Point elasticity is only accurate for one small point change.
He does not care whether the answer is positive or negative.
Elastic- price went down, total revenue went up.
TC=Fixed cost+ cost of every unit (Variable Cost)
Inelastic-tr went up
No monopoly every produces in the inelastic portion of a
demand function. They are not subject to the market price
increases because they are price setters.
Every linear demand function- Tr is in the middle
Marginal Revenue is zero at the mid point. <Maximum total revenue.
Point elasticity is not accurate over a range.
Income elasticity of demand
Percentage change of quantity demand relative to the percentage in
Normal good= income elasticity positive
Inferior good= income elasticity negative
Cross elasticity of demand
Cost has no effect on price, what people are willing to pay only affects
1. Firms higher less people
2. They are replaced by higher skilled people
Elasticity tells us about total revenue.
Price goes up, inelastic, total revenue goes up
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