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Lecture 6

ECON-1102 Lecture 6: 6


Department
ECONOMICS
Course Code
ECON-1102
Professor
N/ A- T B A
Lecture
6

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ECON 1101
M ICROECONOMICS 1
GROUPS C & D
LECTURE 6
ELASTICITY
TEXT: Ch 4
OUTLINE:
1. PRICE – ELASTICITY OF DEMAND
2. ELASTICITY AND REVENUE
3. OTHER ELASTICITIES
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ELASTICITY
Definition: A measure of the responsiveness of one variable
to changes in another variable, cet. par.
1. PRICE ELASTICITY OF DEMAND
%QD QD / QD P . Q
%P P / P Q P
= P/Q × 1/slope of D curve
ε = absolute value of elasticity
P
D
Q of X
ε absolute value of price-elasticity of demand:
increases up the D curve
increases the flatter the D curve
D for commodity X is more price elastic :
the closer the substitutes
the stronger the income effect
- the longer the time period
==
%
%
Q
P
D
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