WEST HILLS
COLLEGE
ECONOMICS
WEST HILLS
COLLEGE
ECONOMICS
Name ...............................................................
ELASTICITY
Some key concepts:
E(D)= % change in Quantity / % change in price
If E(D)<1 (If the elasticity of demand is
less than one) the demand curve is inelastic
If E(D)>1, (If the elasticity of demand is greater
than one) the demand curve is elastic
If E(D)=1, (If the elasticity of demand is equal to
one) the demand curve is unitary elastic
TR=PxQ (Total Revenue= Price times Quantity)
CALCULATING ELASTICITIES
Note: Use point 1 as your starting value!
| P & Q Demanded at Point 1 on a Demand Curve
P Q |
P & Q Demanded at Point 2 on that Demand Curve
P Q |
E(D)..... | Is Demand elastic, inelastic or unit elastic? | What was Total Revenue at point 1? | What was total Revenue at point 2? | Moving from point 1 to 2 did Total Revenue rise or fall or stay same? |
| $10 100 | $8 200 | . | . | . | . | . |
| $10 200 | $8 220 | . | . | . | . | . |
| $10 200 | $8 240 | . | . | . | . | . |
| $10 100 | $9 1000 | . | . | . | . | . |
| $10 100 | $9 101 | . | . | . | . | . |
What does price elasticity of demand measure?
What is the formula for calculating price elasticity of demand?
What is the relationship between price elasticity and total revenue
for elastic demand curves and inelastic demand curves?
If a firm's demand curve is characterized by a price elasticity
of less than 1, and price is raised, what happens to the firm's total revenues?
If a firm's demand curve is characterized by unitary price elasticity
and the price is raised, what happens to the firm's total revenues?
What does it mean if a good is income elastic?
What does cross elasticity of demand measure?
What does price elasticity of supply measure?
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