ECON 102 Lecture Notes - Lecture 19: Inferior Good, Normal Good, Marginal Cost
ā Example
ā Q = 100 - 4P
ā Find Īµ when P = 5
ā
ā Īµ =
ā Example
ā Q = 60 - 2P
ā What price should the firm charge if it wants to maximize Total Revenue?
ā Find where Īµ = -1
ā Īµ = = -1
ā Īµ =
ā -2P = -60 + 2P
ā 60 = 4P
ā P = 15
ā
ā Determinants of price elasticity of demand:
ā Availability of substitutes:
ā cetaris paribus, the more substitutes are available, the more elastic the
demand of the good
ā The portion of a consumer's budget spent on the good:
ā the smaller the portion of the budget, the more inelastic the demand will
be
P
30
60 Q
15
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ECON 102 Full Course Notes
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