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Demand Elasticity: Measuring Responsiveness to Price Changes

Learn about the price elasticity of demand, a measure of how sensitive consumers are to changes in price, and understand the importance of elasticity in analyzing tax burdens.

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Demand Elasticity: Measuring Responsiveness to Price Changes

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  1. Topic 1 Lecture 3 Demand Elasticity The Price Elasticity of Demand for a Good is a measure of the sensitivity or responsiveness of demand for a good to a change in its price. More precisely: Robin Naylor, Department of Economics, Warwick

  2. Topic 1 Lecture 3 Demand Elasticity Robin Naylor, Department of Economics, Warwick

  3. Topic 1 Lecture 3 Demand Elasticity Robin Naylor, Department of Economics, Warwick

  4. Topic 1 Lecture 3 Demand Elasticity -1 0 Robin Naylor, Department of Economics, Warwick

  5. Topic 1 Lecture 3 Demand Elasticity -1 0 Robin Naylor, Department of Economics, Warwick

  6. Topic 1 Lecture 3 Importance of Elasticity Suppose the Government raises the indirect tax on this commodity. How do we show this? p S p* D 0 X* X Robin Naylor, Department of Economics, Warwick

  7. Topic 1 Lecture 3 ST Importance of Elasticity What is the Tax Revenue . . . ? p S p* D 0 X* X Robin Naylor, Department of Economics, Warwick

  8. Topic 1 Lecture 3 ST Importance of Elasticity What is the Tax Revenue? What is the Tax Burden? p S A p* B D 0 X* X Robin Naylor, Department of Economics, Warwick

  9. Topic 1 Lecture 3 ST Importance of Elasticity What is the Tax Burden? How would the shares of the tax burden change with a different price elasticity of demand for the good? ST p p S S A p* B D 0 X* 0 X* X Robin Naylor, Department of Economics, Warwick

  10. Topic 1 Lecture 3 ST Importance of Elasticity What is the Tax Burden? How would the shares of the tax burden change with a different price elasticity of demand for the good? ST p p S S A p* B D D 0 X* 0 X* X Robin Naylor, Department of Economics, Warwick

  11. Topic 1 Lecture 3 ST Importance of Elasticity How would the shares of the tax burden change with a different price elasticity of demand for the good? Why is this? ST p p S S A A p* B B D D 0 X* 0 X* X Robin Naylor, Department of Economics, Warwick

  12. Topic 1 Lecture 3 Now read B&B 4th Ed., ppa. 43-66 Robin Naylor, Department of Economics, Warwick

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