Chapter 19 Elasticity of Demand Affects Total Revenue


Check Out Our Summary of the
Week



I. Introduction
II. Price Elasticity of Demand 1 video III. Interpreting Elasticity of Demand IV. Graphing and Interpreting 3 videos V. Determinates of Demand Elasticity 2 videos VI. Applications XI. Political Economy Book Summaries XII. 2016 Presidential Issues 
Go
to These Advanced Topics VII. Income Elasticity of Demand 1 video VIII. Cross Elasticity of Demand 1 video IX. Price Elasticity of Supply X. Effect of Tax Incidence 3 videos XI. Additional Reading and Audios XII. College Elasticity of Demand XIII. Quizzes with Answers 
II. Price elasticity of demand

Other Micro Chapters

Demand Schedule 

Price  2  3  4  5  6  7  8  9 
Quantity  9  8  7  6  5  4  3  2 
Total Revenue  18  24  28  30  30  28  24  1 
P goes from 4 to 5 and Q from 7 to 6 
P goes from 5 to 6 and Q from 6 to 5 
P goes from 6 to 7 and Q 



Note: A down sloping demand curve is yields a negative E_{D}.
Its sign is often ignored. See Calculating Price Elasticity using calculus and examples 


Relative Change in Quantity 
Terminology 
E_{D } Parameters 
None, will pay anything, numerator is zero. 
Perfectly Inelastic 
E_{D } = 0 
Small 
Inelastic 
0 < E_{D }< 1 
Q demanded and P change same percentage 
Unitary Elasticity 
E_{D }= 1 
Large 
Elastic 
1 < E_{D } < 
Infinitely Large, price doesn't change, denominator is zero 
Perfectly Elastic 
E_{D } is undefined, can't divide by zero. 
A. Elasticity II provides practice measuring E_{D}. Samuel L. Baker, Ph.D. US Carolina B. Approx. PED of Various Products (U.S.) C. Elasticity quiz 1 Elasticity quiz 2 D. Steponic's Economics and More Our Free Internet Libraries improve grades and careers. 
IV. Graphing and Interpretation
A. At the Extremes
B. Total Revenue derived from a Linear Demand Curve
1. Graph Analysis


2. The Total Revenue Test
a. When demand is elastic, price and total revenue move
in the opposite direction.
b. When demand is inelastic, price and total revenue
move in the same direction.
c.
Total
Revenue Test Video has a graphic explanation.
d.
Welker
Video Elasticity &Total Revenue
Elasticity of Demand and Total Revenue 

Elasticity 
When Price Increases 
Total Revenue 

E_{D }>1

Somewhat Elastic 
Quantity
Changing a Lot so a lot of revenue could be lost. 
Decreases 
E_{D} = 1

Unitary Elasticity  Quantity/Price Changing Same % 
No Change 
E_{D} <1

Somewhat Inelastic 
Quantity
Changed Little so a lot of revenue could be gained. 
Increased 
We need to understand cost production to understand making a profit. 
V. Determinates of Demand Elasticity 6 minute Video  
Product Characteristics 
Elastic Demand 
Inelastic Demand 
Number of substitutes  Many  Few or none 
% of purchaser's budget  High  Low 
Type of good  Luxury  Necessity, Emergency 
Desire  No hurry  Required quickly 
Examples  Steak, Vacations  Salt, Bread 
VI. Applications A. Various research methods are used to calculate price elasticity: 1. Test markets 2. Analysis of historical sales data B. Selected income elasticity's 1. Examples
2.View
a table containing elasticity of demand approximations Last Chapter Chapter 19 Class Discussion Questions 