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Sensitivity to Change
Price Elasticity of Demand
Sensitivity to changes in price
 Elastic
 Inelastic
 Elasticity & Revenue
 Use to determine your price –
• Computer ink
• Seminar charges
Other Demand Elasticities
 Cross
– Antitrust cases
Total revenue and Elasticity
If demand is elastic, and increase in
price will lead to a decrease in total
revenue. If demand is inelastic – just
the opposite.
 The mineral spring Question
Public Policy
 Energy again
 Price Elasticity
 Income Elasticity
Price Elasticity of Supply
The price of inputs
– What does it mean to say that the price
elasticity of supply is unit elastic?
Why should you care?
Avoid mistakes – a higher price is no
guarantee of higher revenue
 Interpreting data scanners
 Solve puzzles – property crime and
drug use