ECON 1B03 Midterm: Chapters Review Part 2
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ECON 1B03 Full Course Notes
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Elasticity : measures how responsive qd or qs is to changes in p and other: which by means is that, whether qd or qs changes a lot or a little base on the changes of. Total revenue, tr, is defined as price times the quantity traded: tr = pq. Since the qdp needs to be kept as the maximum. A % change in qd = (qd2 - qd1)/qd1. A % change in p = (p2 - p1) / p1. The % change will be different when the moving direction changes. Point elasticity: measures the impact of a marginal change in price on quantity demanded. Formula : ep = dq/dp * p/q, which the dq/dp is the slope of the demand curve. As price goes up, quantity demand will always goes down, so the coefficient will always be a negative number. But when we say we are talking about price elasticity, we just look at the absolute value of the coefficient.