ECO 1104 Lecture Notes - Demand Curve, Luxury Goods
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26 Jan 2014
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Ped < 1, p increases (decreases), tr increases (decreases) 0. 5 = (% qd) / (% p) If p increases by 10%, qd decreases by 5%, and tr increases by about 5%. Ped = 1, p increases (decreases), tr remains constant. If p increases by 10%, qd decrease by 10% and tr doesn"t change much. Total revenue is a wash no change. The d curve for inelastic goods is relatively steep. The d curve for elastic goods is relatively flat. Every inelastic d curve has at least a range near the top which is elastic (high prices) Every elastic d curve has at least a range near the bottom which is inelastic (low prices) Elasticity along a straight-line demand curve (like figure 5. 5) Higher elasticity for higher prices and lower elasticity for lower prices. For inelastic ped, we know that if p increases, tr increases.
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