M B A 8620 Chapter Notes - Chapter 3: Arc Elasticity, Instant Soup, Demand Curve

• School: Clemson University
• Department: Business Administration
• Course: M B A 8620
• Professor: Ron Gregory

Document Summary

Most important in this chapter, is cost data with functional analysis, cubic functions and quadratic and cesil analysis (nike shoe sales) with a cesil component. This formula can use q as the starting or end or average but the book states that for arc elasticity they use the average. Important to point out is that the result changes with all these versions. The price elasticity of is the percentage change in quantity demanded, q, divided by the percentage change in price, p. Elasticity is measured and usually comes with a negative sign which comes from the demand curve slope that moves downward. Ibms revenue keeps going down but their profits are going up due to margins, they have changed their business model and this is related directly to the elasticity analysis. Normal goods have positive income elasticity, such as coffee. Inferior goods have negative income elasticity, such as instant soup demand not only price elasticity.