ECON 001 Lecture Notes - Lecture 6: Vending Machine, Demand Curve
Document Summary
Price elasticity of demand: the responsiveness of the quantity demanded to a change in price, measured by dividing the percentage change in the quantity demanded of a product by the percentage change in the product"s price. Solve the problem by taking the absolute value since both percentage changes will be negative. Price elasticity can range from zero to infinity. Elastic demand= price elasticity of demand > 1. Inelastic demand = price of elasticity < 1. Slope is constant but not elasticity, change of quantity over quantity over change in price over price equals p/q. The total revenue = the total amount of funds received by a seller of a good or service, calculated by multiplying price per unit by the number of units sold tr= p*q. The change in total revenue due to a decrease in price: If demand is elastic > total revenue increases, If demand is inelastic > total revenues decreases.