Chapter 19 Elasticity of Demand 
Go
to These Advanced Topics

I. Introduction
review math, supply, demand, equilibrium
price II. Price Elasticity of Demand The effect price changes have on quantities purchased useful. 1 video III. Interpreting Elasticity High elasticity has substantial effect, inelastic demand has little quantity movement. IV. Graphic Interpreting of Elasticity elastic is flat, inelastic is steep V. The Total Revenue Test With elastic demand p and TR move in opposite directions, Inelastic the same direction 3 videos VI. Determinates of Demand Elasticity substitutes, price, necessity or luxury, budgets position 1 video VII. Applications Chapter Practice Quizzes Micro Test Review 1 covers chapters 1922 with three pages 
II. Price elasticity of demand


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.) Our Free Internet Libraries improve grades and careers. 
IV.
Graphic Interpreting
of Elasticity
A. At the
Extremes
B. Total Revenue derived from a Linear Demand Curve
1. Graph Analysis

a. Moving from left to right
on the bottom graph indicates

V. 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. 
VI. 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 
VII. Applications
2.View
a table containing elasticity of demand approximations Chapter 1 Practice Quizzes 1) amosweb practice test by specific topic 2) Elasticity Quiz with Answers from Dr. R. L. Reynolds of Boise St. University.
3)
Click Level
1 Elasticity Questions, no
answers provided
5) More Practice Problems with Answers from Middle Tennessee State with answers
