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Measurement and Interpretation of Elasticities

Definition: Elasticity. Comparison of the change in quantity demanded with the change in the price of a good.Elastic demand price increases, demand decreasesInelastic demand price increases, demand remains the same.. Alternative Elasticity Concepts. Own price elasticity = %DQbeef %DPbeefIncome elasticity = %DQbeef %DIncomeCross price elasticity = %DQbeef %DPchicken.

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Measurement and Interpretation of Elasticities

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    1. Measurement and Interpretation of Elasticities Chapter 5

    2. Definition: Elasticity Comparison of the change in quantity demanded with the change in the price of a good. Elastic demand– price increases, demand decreases Inelastic demand – price increases, demand remains the same.

    3. Alternative Elasticity Concepts Own price elasticity = %DQbeef ÷ %DPbeef Income elasticity = %DQbeef ÷ %DIncome Cross price elasticity = %DQbeef ÷ %DPchicken

    4. Alternative Elasticity Concepts Own price elasticity = %DQbeef ÷ %DPbeef Income elasticity = %DQbeef ÷ %DIncome Cross price elasticity = %DQbeef ÷ %DPchicken

    5. Alternative Elasticity Concepts Own price elasticity = %DQbeef ÷ %DPbeef Income elasticity = %DQbeef ÷ %DIncome Cross price elasticity = %DQbeef ÷ %DPchicken

    6. Own-Price Elasticity of Demand

    7. Own-Price Elasticity of Demand

    8. Calculation of Elasticity (P.101) Assume that your consumption of hamburgers drops from 3 to 2 when the price of hamburgers increases from $1.00 to $1.25. (2-3)/2.5 = -1.8 (1.25-1.00)/1.125

    9. Own-Price Elasticity of Demand

    13. Interpreting the Own-Price Elasticity of Demand

    14. Impacts of Supply Change

    16. Income Elasticity of Demand

    17. Interpreting the Income Elasticity of Demand

    18. Some Examples

    19. Some Examples

    20. Some Examples

    21. Cross-Price Elasticity of Demand

    22. Interpreting the Cross-Price Elasticity of Demand

    23. Some Examples

    24. Some Examples

    25. Some Examples

    26. Price Flexibility

    27. Price Flexibility

    28. Price Flexibility

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