©2006PrenticeHallBusinessPublishingEconomicsR.GlennHubbard,AnthonyPatrickO’Brien—1sted.chapterchaptersixsixPreparedby:Fernando&YvonnQuijanoElasticity:TheResponsivenessofDemandandSupply2of29©2006PrenticeHallBusinessPublishingEconomicsR.GlennHubbard,AnthonyPatrickO’Brien—1sted.CHAPTER6:Elasticity:TheResponsivenessofDemandandSupplyAfterstudyingthischapter,youshouldbeableto:Definethepriceelasticityofdemandandunderstandhowtocalculateit.Discussthedeterminantsofthepriceelasticityofdemand.Understandtherelationshipbetweenthepriceelasticityofdemandandtotalrevenue.Definethecross-priceelasticityofdemandandtheincomeelasticityofdemand,andunderstandhowtheyarecalculatedandwhattheirmaindeterminantsare.Usepriceelasticityandincomeelasticitytoanalyzeeconomicissues.Definethepriceelasticityofsupply,andunderstandhowitiscalculatedandwhatitsmaindeterminantsare.DoPeopleCareaboutthePricesofBooks?LEARNINGOBJECTIVES12345Inthischapterwewillseehowtomeasuretheresponsivenessofthequantitydemandedofaproducttochangesinitsprice.63of29©2006PrenticeHallBusinessPublishingEconomicsR.GlennHubbard,AnthonyPatrickO’Brien—1sted.CHAPTER6:Elasticity:TheResponsivenessofDemandandSupplyElasticity:TheResponsivenessofDemandandSupplyElasticityAmeasureofhowmuchoneeconomicvariablerespondstochangesinanothereconomicvariable.4of29©2006PrenticeHallBusinessPublishingEconomicsR.GlennHubbard,AnthonyPatrickO’Brien—1sted.CHAPTER6:Elasticity:TheResponsivenessofDemandandSupplyThePriceElasticityofDemandandItsMeasurementLEARNINGOBJECTIVE1PriceelasticityofdemandTheresponsivenessofthequantitydemandedtoachangeinprice,measuredbydividingthepercentagechangeinthequantitydemandedofaproductbythepercentagechangeintheproduct’sprice.MeasuringthePriceElasticityofDemand5of29©2006PrenticeHallBusinessPublishingEconomicsR.GlennHubbard,AnthonyPatrickO’Brien—1sted.CHAPTER6:Elasticity:TheResponsivenessofDemandandSupplyThePriceElasticityofDemandandItsMeasurementElasticDemandandInelasticDemandElasticdemandDemandiselasticwhenthepercentag...
