Ch. 4: Elasticity. Define, calculate, and explain the factors that influence the own price elasticity of demand the cross price elasticity of demand the income elasticity of demand the elasticity of supply. Demand for parking garage passes. Price Elasticity of Demand.
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Define, calculate, and explain the factors that influence
%DQ = DQ/Qavg
%DP = DP/Pavg
e = .2/.05 =4
At prices above the mid-point of the demand curve, demand is elastic.
At prices below the mid-point of the demand curve, demand is inelastic.
= % D P - % D P(e)
= % D P(1-e)
P increase TR decreases
P decrease TR increases
P increase TR increases
P decrease TR decreases
P increase or decrease TR unchanged.
exy= %D quantity demanded for x
%D change in price of y
% D in income
A change in demand causes
Elasticity of supply