The document discusses concepts of elasticity in microeconomics including definitions of price elasticity of demand, cross-price elasticity, and income elasticity. It provides examples of how demand changes with price and how to calculate different elasticity measures using the percentage change formula. Graphs and a demand schedule are presented to illustrate total revenue.

1. Microeconomics
Chapter 5
Elasticity

2. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

3. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

4. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

5. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

6. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

7. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

8. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

9. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

10. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

11. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

12. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

13. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

14. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

15. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

16. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

17. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

18. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve

19. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve
Price changes
demand curve does
not change
quantity demanded
changes

20. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

21. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

22. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

23. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

24. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

25. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

26. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

27. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

28. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

29. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

30. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

31. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

32. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

33. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

34. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

35. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve

36. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve
Price does not
change
demand curve
shifts
quantity demanded
changes

37. Movement or Shift?
Variable Change Movement Shift
Price
Income
Related Goods
Tastes
Population and Demographics
Expectations

38. elasticity
price elasticity of demand
total revenue
total expenditure
income elasticity of demand
cross-price elasticity of demand
price elasticity of supply
Key Terms

39. ELASTICITY EQUATION BENCHMARK
Price Elasticity
of Demand
Cross-Price
Elasticity
Income
Elasticity
Price Elasticity
of Supply
Midpoint
Formula
Inelastic | Elastic
1
Compliments | Substitutes
0
Inferior | Normal | Luxury
0 1
Inelastic | Elastic
1
%∆QD
%∆P
%∆QS
%∆P
%∆QD1
%∆P2
%∆QD
%∆I
∆Q
∆PQ
Px

42. Elasticity

43. Elasticity
If I change one thing does
another thing also change?

44. Elasticity

45. Elasticity
A measure of how much
one economic variable
responds
to changes in
another economic variable

46. Percentage Change
%

47. Percentage Change
%
New - Old
Old

48. Percentage Change
%
New - Old
Old
Ignore units in the scale

49. Scales can be deceptive

50. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price

51. $0
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
$100.00
3 4.5 6
Gallons - Gasoline
Price

53. Demand
Schedule

54. Demand
Schedule

55. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule

56. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule

57. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule

58. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule
Total Revenue
Curve

59. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule
Total Revenue
Curve
Total
Revenue

60. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule
Total Revenue
Curve
Total
Revenue
Price Per Pizza

61. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule
Total Revenue
Curve
10 20 30 40 50 60 70 80 90
0
60
120
180
240
300Total
Revenue
Price Per Pizza

62. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule
Total Revenue
Curve
10 20 30 40 50 60 70 80 90
0
60
120
180
240
300Total
Revenue
Price Per Pizza

63. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule
Total Revenue
Curve
10 20 30 40 50 60 70 80 90
0
60
120
180
240
300Total
Revenue
Price Per Pizza

64. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule
Total Revenue
Curve
10 20 30 40 50 60 70 80 90
0
60
120
180
240
300Total
Revenue
Price Per Pizza

65. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule
Total Revenue
Curve
10 20 30 40 50 60 70 80 90
0
60
120
180
240
300Total
Revenue
Price Per Pizza

66. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule
Total Revenue
Curve
10 20 30 40 50 60 70 80 90
0
60
120
180
240
300Total
Revenue
Price Per Pizza

67. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule
Total Revenue
Curve
10 20 30 40 50 60 70 80 90
0
60
120
180
240
300Total
Revenue
Price Per Pizza

68. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule
Total Revenue
Curve
10 20 30 40 50 60 70 80 90
0
60
120
180
240
300Total
Revenue
Price Per Pizza

69. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule
Total Revenue
Curve
10 20 30 40 50 60 70 80 90
0
60
120
180
240
300Total
Revenue
Price Per Pizza

70. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule
Total Revenue
Curve
10 20 30 40 50 60 70 80 90
0
60
120
180
240
300Total
Revenue
Price Per Pizza

71. Price Elasticity of Demand

72. Price Elasticity of Demand

73. Price Elasticity of Demand
%
%

74. Price Elasticity of Demand
%
%
QD

75. Price Elasticity of Demand
%
%
QD
P

76. Price Elasticity of Demand
%
%
QD
P
Percentage Change in Quantity
Demanded
Percentage Change in Price

77. Price Elasticity of Demand
1
ElasticInelastic
<1 >1
1. Calculate Elasticity
2.Take AbsoluteValue
3. Compare to benchmark of 1

78. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price

79. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price

80. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price

81. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price

82. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price

83. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
%QD
%P

84. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
%QD
%P
(4-5)÷5
(6-3)÷3

85. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
%QD
%P
(4-5)÷5
(6-3)÷3
-.2
1

86. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
%QD
%P
(4-5)÷5
(6-3)÷3
-.2
1
.2

87. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Price Increase

88. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Price Increase

89. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Price Increase

90. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Price Increase

91. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Price Increase

92. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Price Increase

93. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
%QD
%P
Price Increase

94. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
%QD
%P
(3-5)÷5
(4-3)÷3
Price Increase

95. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
%QD
%P
(3-5)÷5
(4-3)÷3
-.4
.33
Price Increase

96. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
%QD
%P
(3-5)÷5
(4-3)÷3
-.4
.33
1.2
Price Increase

97. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Price Decrease

98. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Price Decrease

99. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Price Decrease

100. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Price Decrease

101. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Price Decrease

102. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Price Decrease

103. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
%QD
%P
Price Decrease

104. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
%QD
%P
(5-3)÷3
(3-4)÷4
Price Decrease

105. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
%QD
%P
(5-3)÷3
(3-4)÷4
.66
-.25
Price Decrease

106. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
%QD
%P
(5-3)÷3
(3-4)÷4
.66
-.25
2.67
Price Decrease

107. Midpoint
Formula

108. Midpoint Formula
Q
Q
P
P

109. Midpoint Formula
Delta Q
over
Q Bar
Q
Q
P
P

110. Midpoint Formula
Delta Q
over
Q Bar
Delta P
over
P Bar
Q
Q
P
P

111. Midpoint Formula
Q
Q
P
P

112. Midpoint Formula
Q
Q
P
P
Trick: Flip denominator and multiply

113. Midpoint Formula
Q
Q
P
P
Trick: Flip denominator and multiply

114. Midpoint Formula
Q
Q P
P
Trick: Flip denominator and multiply
X =

115. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Midpoint Formula

116. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Midpoint Formula

117. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Midpoint Formula

118. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Midpoint Formula

119. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Midpoint Formula

120. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Midpoint Formula

121. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Midpoint Formula
Q
Q P
P
x

122. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Midpoint Formula
Q
Q P
P
x
2
4 1
3.5
x

123. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
7
4
Midpoint Formula
Q
Q P
P
x
2
4 1
3.5
x

124. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
7
4
1.75
Midpoint Formula
Q
Q P
P
x
2
4 1
3.5
x

125. What determines
Price Elasticity of
Demand?

126. Close Substitutes
Passage of Time
Luxuries vs. Necessities
Definition of Market
Share of Budget

127. Close Substitutes

128. Close Substitutes

129. Close Substitutes
Elastic >1

130. Close Substitutes
Elastic >1

131. Close Substitutes
Elastic >1
Inelastic <1

132. Passage of Time

133. Passage of Time
More Time
More Elastic

134. Luxuries vs. Necessities

135. Luxuries vs. Necessities
Elastic

136. Luxuries vs. Necessities
Elastic Inelastic

137. Definition of Market

138. Definition of Market
Elastic

139. Definition of Market
Elastic Inelastic

140. Definition of Market
Elastic Inelastic
Demand for Gasoline
in General

141. Definition of Market
Elastic Inelastic
Demand for Gasoline
in General
Demand for Gasoline
in Rexburg

142. Share of the Budget
Small Large

143. Share of the Budget
Inelastic
Small Large

144. Share of the Budget
ElasticInelastic
Small Large

145. Price Elasticity
and
Total Revenue

146. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
Total Revenue
TR = P x Q

147. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
Total Revenue
TR = P x Q

148. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
Total Revenue
TR = P x Q

149. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
$3.00 x 5 = $15
Total Revenue
TR = P x Q

150. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
$6.00 x 4 = $24
$3.00 x 5 = $15
Total Revenue
TR = P x Q

151. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
$6.00 x 4 = $24
$3.00 x 5 = $15
Lose
Total Revenue
TR = P x Q

152. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
$6.00 x 4 = $24
$3.00 x 5 = $15
Lose
Gain
Total Revenue
TR = P x Q

153. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
$6.00 x 4 = $24
$3.00 x 5 = $15
Net Gain = $9
Lose
Gain
Total Revenue
TR = P x Q

154. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
$6.00 x 4 = $24
$3.00 x 5 = $15
Inelastic (<1)
Raising prices
will increase
total revenue
Net Gain = $9
Lose
Gain
Total Revenue
TR = P x Q

155. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Total Revenue
TR = P x Q

156. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Total Revenue
TR = P x Q

157. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
Total Revenue
TR = P x Q

158. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
$3.00 x 5 = $15
Total Revenue
TR = P x Q

159. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
$4.00 x 3 = $12
$3.00 x 5 = $15
Total Revenue
TR = P x Q

160. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
$4.00 x 3 = $12
$3.00 x 5 = $15
Lose
Total Revenue
TR = P x Q

161. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
$4.00 x 3 = $12
$3.00 x 5 = $15
Lose
Gain
Total Revenue
TR = P x Q

162. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
$4.00 x 3 = $12
$3.00 x 5 = $15
Net Gain = -$3
Lose
Gain
Total Revenue
TR = P x Q

163. $0
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
$4.00 x 3 = $12
$3.00 x 5 = $15
Elastic (>1)
Raising prices
will decrease
total revenue
Net Gain = -$3
Lose
Gain
Total Revenue
TR = P x Q

164. Cross-Price
Elasticity of Demand

165. Cross-Price
Elasticity of Demand
%
%
QD
P

166. Cross-Price
Elasticity of Demand
%
%
QD
P
1

167. Cross-Price
Elasticity of Demand
%
%
QD
P
1
2

168. Cross-Price
Elasticity of Demand
Percentage Change in Quantity
Demanded of one good
Percentage Change in Price
of another good
%
%
QD
P
1
2

169. Cross-Price
Elasticity of Demand
0
SubstitutesCompliments
<0 >0
1. Calculate Elasticity
2. Compare to benchmark of 0

170. %
%
QD1
P2

171. %
%
QD1
P2 50%

172. %
%
QD1
P2
35%
50%

173. %
%
QD1
P2
35%
50%
=.7

174. %
%
QD1
P2
35%
50%
=.7 >0

175. %
%
QD1
P2
35%
50%
=.7 >0
Substitutes

176. %
%
QD1
P2

177. %
%
QD1
P2 50%

178. %
%
QD1
P2
-40%
50%

179. %
%
QD1
P2
-40%
50%
=-.8

180. %
%
QD1
P2
-40%
50%
=-.8 <0

181. %
%
QD1
P2
-40%
50%
=-.8 <0
Compliments

182. Cross-Price
Elasticity of Demand
0
SubstitutesCompliments
<0 >0
%
%
QD
P
1
2

183. Income
Elasticity of Demand
Normal, Inferior, or Luxury?

184. Percentage Change in
Quantity Demanded
Percentage Change in Income
Income
Elasticity of Demand
%
%
QD
I

185. Income
Elasticity of Demand
0
LuxuryInferior
<0 >1
1. Calculate Elasticity
2. Compare to benchmark of 0 and 1
1
Normal

186. %
%
QD
I

187. %
%
QD
I 20%

188. %
%
QD
I
10%
20%

189. %
%
QD
I
10%
20%
=.5

190. %
%
QD
I
10%
20%
=.5
>0
<1

191. %
%
QD
I
10%
20%
=.5
>0
<1
Normal

192. %
%
QD
I

193. %
%
QD
I 20%

194. %
%
QD
I
-50%
20%

195. %
%
QD
I
-50%
20%
=-2.5

196. %
%
QD
I
-50%
20%
=-2.5 <0

197. %
%
QD
I
-50%
20%
=-2.5 <0
Inferior

198. %
%
QD
I

199. %
%
QD
I 20%

200. %
%
QD
I
100%
20%

201. %
%
QD
I
100%
20%
= 5

202. %
%
QD
I
100%
20%
= 5 >1

203. %
%
QD
I
100%
20%
= 5 >1
Luxury

204. Income
Elasticity of Demand
0
LuxuryInferior
<0 >11
Normal
%
%
QD
I

205. Price Elasticity
of Supply

206. Price Elasticity of Supply
%
%

207. Price Elasticity of Supply
%
%
QS

208. Price Elasticity of Supply
%
%
QS
P

209. Price Elasticity of Supply
%
%
QS
P
Percentage Change in
Quantity Supplied
Percentage Change in Price

210. Price Elasticity of Supply
1
ElasticInelastic
<1 >1
1. Calculate Elasticity
2. Compare to benchmark of 1

211. %
%
QS
P

212. %
%
QS
P 20%

213. %
%
QS
P
10%
20%

214. %
%
QS
P
10%
20%
=.5

215. %
%
QS
P
10%
20%
=.5 <1

216. %
%
QS
P
10%
20%
=.5 <1
Inelastic

217. %
%
QS
P

218. %
%
QS
P 20%

219. %
%
QS
P
40%
20%

220. %
%
QS
P
40%
20%
= 2

221. %
%
QS
P
40%
20%
= 2 >1

222. %
%
QS
P
40%
20%
= 2 >1
Elastic

223. Price Elasticity of Supply
1
ElasticInelastic
<1 >1
%
%
QS
P

224. 1. Prices increase from $5.00 to $6.00. Quantity
demanded decreases from 100 units to 80 units.
What is the price elasticity of demand?
Midpoint Formula
What is the total revenue at $5.00 per unit?
$5 x 100 = $500
What is the total revenue at $6.00 per unit?
$6 x 80 = $480
∆Q
∆PQ
Px
20
190
5.50x 1.22110
90
= = =