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Make a list of 5 items you purchase each month. • Next to each item, put its price and the quantity you purchase. • Which items would you buy more of if the prices were lower? • Which items would you buy less of if the prices were higher? • For which items are there substitutes? • Do any of your purchases have a complement? Of Demand Elasticity of Demand The relationship between the percentage change in quantity demanded and the percentage change in price. Elastic Demand % change in Qd > % change in P Inelastic Demand % change in Qd < % change in price Unit Elastic Demand % change in Qd = % change in P Factors that Determine Elasticity Goods May Be More Elastic When: Number of Substitutes Luxuries v. Necessities % of Income Spent On the Good Time Complete Ch3 Demand H/O So what? Elasticity of Demand Affects TOTAL REVENUE ( SOMETHING BUSINESSES CARE VERY MUCH ABOUT) For your scenario, determine if demand is elastic, inelastic or unit-elastic. Also determine change in revenue. In the first week, Javier sold 100 basketballs for $20.00 each. What was his total revenue? #1 The second week,he #2 #3 #4 The second week, he raised the price of lowers price to $18.00. He basketballs to $22.00. What then sold 130. was % change? He then sold Total Revenue, week 2? 75 bbls? % change? What Change in revenue? was his total revenue in the second week? Elasticity? Change in revenue? Elasticity? The second week, he raises price to #22.00. He then sold 95. Total revenue? Change in revenue? The second week, he lowers price to $18.00. He then sells 105. Total revenue? Change in revenue? Homework Section Review p. 84 # 2-4 Read p. 85-Developing Economic Skills: “Thinking the Ceteris Paribus Way; or, It’s Never Too Late To Learn Some Latin” Write a short answer to the Question to Answer The Relationship Between Elasticity and Total Revenue