All I remember is math..... and graphs......
This was our brains trying to do math.
Was Mrs. Weser demanding us to do math?
Yes she was. We practiced using math to figure out the elasticity of demand. We graphed demand and used the price changes and quantity demanded changes to decide if the demand for the product was elastic or not.
There are 2 ways to do this.
Take 2 different points from a demand curve of different prices and where the quantity demanded is for that price.
Calculate the % change of the quantity demanded, and dividing that by the % change of the price. And (somehow) you get elasticity. The lower the number is below 1 is more and more inelastic. Higher than 1 is more and more elastic.
Another way is called the revenue test. You multiply the price by quantity demanded to figure out how much the product made at that price.
If there is a dramatic change in the total revenue then the product is more elastic. If it is about the same then it is inelastic.
The revenue test was much easier to comprehend even though it did not give an exact number for elasticity. It is better for businesses to quickly see if they should raise their prices or lower them slightly to earn more money altogether.
We did a lot of math this week! All we have to remember is that it is going to help us as we get older and go out into the world. We will be thanking Mrs. Weser later for all the math she taught us.
ReplyDeleteI like the picture, it completely shows the inside of my mind after a math-filled econ class. I wish there was a way to get an exact value out of total revenue because it is SOOOOO Much Easier.
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