ECON-2000 Lecture Notes - Lecture 3: Demand Curve
Document Summary
Chapter three (equilibrium: how supply and demand determine prices. Is the price at which the quantity demanded is equal to the quantity supplied. Technology: demand compared to quantity demanded and supply compared to quantity. The elasticity of demand: elasticity rule: if two linear demand (or supply) curves run through a common point, then at any given quantity the curve that is flatter is more elastic. Determinants of the elasticity of demand: the demand curve for oil is not very elastic. Using the midpoint method to calculate the elasticity of demand: % qua(cid:374)tity de(cid:373)a(cid:374)d/ % price, look on pages 55 and 56 for this formula. Total revenues and the elasticity of demand: revenue = price x quantity , or r = p x q. Applications of demand elasticity: how american farmers have worked themselves out of a job, why the war on drugs is hard to win. Calculating the elasticity of supply: look on page 63, es = (cid:894)% qsupplied(cid:895)/(cid:894)% price(cid:895)
