ECON 1050 Chapter Notes - Chapter 4: Caitlyn Jenner, Unit, Longrun
22 Sep 2014
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Price elasticity of demand: you know that when supply increases, the equilibrium price falls and the equilibrium quantity increases, the price elasticity of demand~ is a units free measure of the responsiveness of the quantity demanded of a good to change in its price when all other influences on buying plans remain the same. Total revenue and elasticity: total revenue~ from the scale of a good equals the price of the good multiplies by the quantity sold, when a price changes, total revenue also changes. But a cut does not always decrease total revenue: depends on elasticity, if demand is elastic, a 1% price cut increases the quantity sold by more than 1% and total revenue increases, if demand is inelastic, a 1% price cut increases the quantity sold by less than 1% and total revenue decreases, if demand is unit elastic, a 1% price cut increases the quantity sold by 1% and total revenue does not change.
