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Elasticity Problems and Total Revenue Analysis in Economics

Calculate elasticity of products, determine if elastic or inelastic. Learn to analyze total revenue changes and apply total revenue test. Understand demand dynamics based on determinants and graph shifts. Practice scenarios with quantity demanded vs. demand changes. Create graphs for various product scenarios. Improve economic analysis skills.

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Elasticity Problems and Total Revenue Analysis in Economics

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  1. Complete the elasticity problems and turn in. • . Show your work. • Ed = the product’s elasticity as a number. Based on the number, is the product elastic or inelastic. Example • Ed = 4 • Elasticity = elastic The questions that go with the graphs. • First calculate the total revenue at each price and then based on the change in TR decide whether the product is elastic or inelastic • Use the total revenue test we discussed yesterday

  2. POP QUIZ! COMING SOON

  3. YESTERDAY WE SAID … • IF PRICE GOES DOWN …. • The quantity demanded goes up • And vice versa

  4. SPEAKING IN PRECISE TERMS AS AN ECONOMIST…. • “ A “change in quantity demanded” means there has been a change in …… • The price of the product • This is illustrated graphically by movement up and down the demand curve

  5. A “change in demand” means.. • A nonprice factor (determinant) has caused demand to increase or decrease

  6. T I M E R ASTES NCOME ARKET SIZE XPECTATIONS ELATED GOODS, PRICE OF 5 Determinants of Demand

  7. Chevy Trucks and Ford Trucks are • Substitute Goods • If the price of Chevy Trucks goes up the demand for Ford Trucks will • Go Up • Paint and paint brushes are…. • Complementary goods • If the price of paint goes down, the demand for paint brushes … • Goes up

  8. A CHANGE IN DEMAND IS SHOWN GRAPHICALLY BY … • A SHIFT IN THE DEMAND CURVE • IF THE DEMAND CURVE SHIFTS TO THE RIGHT THEN DEMAND HAS… • INCREASED • IF THE DEMAND CURVE SHIFTS TO THE LEFT THEN DEMAND HAS DECREASED

  9. Complete the following on your own sheet of paper • In the following scenarios, determine if a change in quantity demanded or a change in demand has taken place and indicate if the change is increasing or decreasing demand. Create graphs for each one. • Oprah selects your book as her “Book of the Month.” Congrats. Create a graph for your book. • Dell computer has a “sale of the century” on their pc’s. Apple sales suffer. Create graphs for Dell and Apple. • Prom tickets get very, very expensive. Limo services suffer. Create graphs for prom tickets and limo services. • Cheerios is proven to lower cholesterol. Baby Boomers can’t get enough of them. Create a graph for cheerios • Home Depot has a sale on their plants and flowers. Customers pick up plant fertilizer while they are at it. Create graphs for plants/flowers and one for fertilizer. • There is an e-coli breakout at the local Jack-In-The –Carton restaurants. Create a graph for their meals.

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