ECON-2000 Lecture Notes - Lecture 10: Sony Ten, Demand Curve

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6 Feb 2017
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Econ Lecture 10: Types of Elasticity
2/6/17
Perfectly inelastic: no change in quantity demanded when the price changes
Ex: insulin P
D
Q
Perfetly elasti: ifiitely sesitie to prie. If prie hages y ANY aout, e o’t uy ay
of the good
Ex: breaking change. You would be happy to trade ten $1 bills for one $10 bill, but not for
any other amount. P
D
Q
Slope and Elasticity
They are actually not the same
Linear demand: same slope at all points, but different elasticity at all points.
Elasticity decreases as we move down the demand curve
Revenue
P*Q (a rectangle under the curve)
If a firm has some monopoly and can adjust the price of its good without losing
sales, then they can charge a higher or lower price that is more profitable
P At different points on the curve, there is a different
area. You want the area (revenue) to be maximized.
If you cross a line at the top of this
graph is looks like a I for Inelastic
If you cross a line at the top of this
graph is looks like a E for Elastic
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