Hey there -
Some stuff to start elasticity - we'll be going over it in class on Monday, but if you're able to look stuff over this weekend, it could give you a headstart.
http://apecon.us/tanstaafl_files/ Elasticity video - it's 38 minutes long, just a warning. :)
Elasticity animated gif file: http://www.reffonomics.com/elasticity1.html
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3 comments:
this stuff seems kinda confusing. i got from the animation that it has to do with the change in marginal revinue with respect to the change in quantity and how marginal revenue approaches a maximum and then regress on the opposite side of the pinnacle. I also looked at some other examples and it said to make sure to realize that price vs. demand graphs may have the different slopes and appear to have different "elasticity" but you have to look at the growth with relation to the quanity, so the two may have the same elasticity...is this kinda correct or am i just confused?
I really dont understand the animation and I dont have 38 minutes to watch a video but I tried to interpret it as best I could. I think that elasticity has something to do with the fact that revenue reaches a maximum at a given qauntity and then goes back down.
Don't worry too much at the moment - hopefully it will make more sense after class today.
It's the idea that even though the law of demand is true (we buy less at higher prices than at lower), there are some things that it's not 100% true on. For example, the price of gasoline. A 10, 20 or even 50 cent rise in the price of gasoline really does not affect consumption - I still have to fill up my tank to get to work. Therefore, the law of demand is...well, not totally accurate.
This changes the slope of the demand curve.
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