Today’s Warm Up.

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Presentation transcript:

Today’s Warm Up

Calculating Elasticity – A refresher… Calculate elasticity for two points on a demand curve, point A and point B. For the sake of plugging these points into the formula, assume point A = (Q1, P1) and point B = (Q2, P2). A: Price = $4 Qty = 120 B: Price = $6 Qty = 80 Calculate elasticity AGAIN, this time making point B = (Q1, P1) and point A = (Q2, P2). What do you notice?

Stretch your legs! Grab two different color highlighters or light color markers.

Total Revenue (TR) = Price x Quantity Sold TR = P x Q How does TR change as we move along the demand curve? Depends on elasticity!!!

Recalculate elasticity using our new formula  Calculate elasticity for two points on a demand curve, point A and point B. For the sake of plugging these points into the formula, point A = (Q1, P1) and point B = (Q2, P2). A: Price = $4 Qty = 120 B: Price = $6 Qty = 80 Calculate elasticity AGAIN, this time making point B = Q1 and point B = Q2. What do you notice now????