Do you want BuboFlash to help you learning these things? Or do you want to add or correct something? Click here to log in or create user.



#cfa #cfa-level-1 #economics #microeconomics #reading-13-demand-and-supply-analysis-introduction #study-session-4
if elasticity were equal to negative two, then the percentage change in quantity demanded would be twice as large as the percentage change in price. It follows that a 10 percent fall in price would bring about a rise in quantity of greater magnitude, in this case 20 percent. True, each unit of the good has a lower price, but a sufficiently greater number of units are purchased so that total expenditure (price times quantity) would rise as price falls when demand is elastic.
If you want to change selection, open document below and click on "Move attachment"

4.2. Own-Price Elasticity of Demand: Impact on Total Expenditure
at elasticity is defined as the ratio of the percentage change in quantity demanded to the percentage change in price. So if demand is elastic, a decrease in price is associated with a larger percentage rise in quantity demanded. For example, <span>if elasticity were equal to negative two, then the percentage change in quantity demanded would be twice as large as the percentage change in price. It follows that a 10 percent fall in price would bring about a rise in quantity of greater magnitude, in this case 20 percent. True, each unit of the good has a lower price, but a sufficiently greater number of units are purchased so that total expenditure (price times quantity) would rise as price falls when demand is elastic. If demand is inelastic, however, a 10 percent fall in price brings about a rise in quantity less than 10 percent in magnitude. Consequently, when demand is inelastic, a fal


Summary

statusnot read reprioritisations
last reprioritisation on suggested re-reading day
started reading on finished reading on

Details



Discussion

Do you want to join discussion? Click here to log in or create user.