ECE 394 Chapter Notes - Chapter 4: Grape, Midpoint Method, Demand Curve

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Price elasticity of demand= % change in q demanded. Mid-point method: measures the percentage change relative to a point midway between two points. Knowing if a good is elastic or inelastic allows for businesses to determine whether a price increase will cases total revenue to rise or fall. Total revenue: amount that a rm receives from the sale of goods and services calculated as the quantity sold x price paid for each unit. Increase in price affects total revenue: quantity effect, decrease in revenue, that results from selling fewer units of the good, price effect, increase in revenue, that results from receiving a higher price for each unit sold. When a good is elastic, and price increases, it causes a decrease in quantity demanded (quantity effect outweighs price effect) and will cause total revenue to fall decrease in price=increase in revenue.

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