Class summary 11/9

Elasticity= % change in Quantity Demanded/ % change in (whatever you’re interested in)own price

If n is	Demand at that point is…	“picture”	“Word”	Total revenue changes
>1	“elastic”	flat	sensitive	Change in revenue move in Opposite to change in price
=1	Unit elastic	\	\	\
<1	inelastic	steep	Not very sensitive	Change in revenue as change in price

What IMPACTS n?

a.     TIME

b.     BUDGETS

c.      SUBSTITUTES

Example: Apples

Price of today: $1.50           Quantity of today: 6

Price of tomorrow: $ 2.00   Quantity of tomorrow: 2

N=  [(2-6)/6]/[(2-1.50)/1.50]=2

Price goes up, quantity goes down, demand curve slopes down, n is always negative!

Pick two points on the demand curve.

Point a: high price with low quantity

Point b: low price with high quantity

Any percentage change in quantity for point b is big, and any percentage change in price for point b is small, big/small = big = elastic = sensitive

Minivans, Ford Minivans, Red Ford Minivans.

Time:X

BUDGETS:X

SUBSTITUTES: yes