ECON 101 Lecture 3: Discussion 3 (Lec 6-7)

• School: U of M
• Department: Economics
• Course: ECON 101
• Professor: Ronald C Caldwell

Document Summary

Price elasticity of demand measure of the responsiveness of quantity demanded to a change in price: unit elastic- % change in price = % change in quantity demanded. Ex: using the midpoint method, calculate the price elasticity of demand over the region where price: (cid:2186)= %(cid:2185)(cid:2190)(cid:2189)(cid:2187) (cid:2191) (cid:2173)(cid:2186) %(cid:2185)(cid:2190)(cid:2189)(cid:2187) (cid:2191) (cid:2200)(cid:2191)(cid:2185)(cid:2187)=((cid:2173)(cid:2779) (cid:2173)(cid:2778) (cid:2173)(cid:2778)+(cid:2173)(cid:2779)(cid:2779) (cid:2172)(cid:2779) (cid:2172)(cid:2778) (cid:2172)(cid:2778)+(cid:2172)(cid:2779)(cid:2779) increases from -. Te (when p = 10) = *500 = . Te (when p = 20) = *400 = . Price effect: we are getting extra from each of the. Change in price * quantity (-) * 400 = . Quantity effect: there are 100 people who didn"t buy the product b/c the price per unit increased. (old price) * -100 (quantity that would have been sold in addition at the old price) = +- = = change in total expenditure. = (cid:884)(cid:882)(cid:887)(cid:882)(cid:884)(cid:887) (cid:2778) (cid:2203)(cid:2191)(cid:2202) (cid:2187)(cid:2201)(cid:2202)(cid:2191)(cid:2185: 2) suppose x and y are related. Compliments: ex: hot fudge and ice cream.