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Principles of Microeconomics


Elasticity


The concept of elasticity is an important one in economics, both for businesses and policymakers. The basic idea behind the concept of elasticity is simple: it is a measure of how responsive economic agents are to changes in economic conditions. That is, instead of simply determining whether prices and quantities rise or fall in response to an environmental change, the concept of elasticity is focused on determining “how much” prices and quantities rise or fall when economic conditions change. The Pencasts for this topic illustrate the following: how to compute various elasticities of demand and supply, how the elasticity of demand is related to the amount of revenue firms received (equivalently the amount spent by consumers), and how the elasticities of demand and supply impact changes in equilibrium.


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Computing Price Elasticity of Demand

This Pencast shows students how to compute the price elasticity of demand using an applied problem. [Play Pencast]


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Computing Income Elasticity of Demand

This Pencast shows how to compute the income elasticity of demand using an applied problem. [Play Pencast]


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Computing Cross-Price Elasticity of Demand

This Pencast shows how to compute the cross-price elasticity of demand using an applied problem. [Play Pencast]


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Computing Price Elasticity of Supply

This Pencast shows how to compute the price elasticity of supply using an applied problem. [Play Pencast]


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Price Effects, Quantity Effects, and Total Revenue

This Pencast illustrates how a decrease in the price of a good creates price and quantity effects. In addition, it shows how these competing effects alter the revenue received by firms (or spending by consumers). [Play Pencast]


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Elasticity and Total Revenue

This Pencast illustrates how a decrease in the price of a good affects the revenue received by firms when the fact a relatively elastic demand curve and a relatively inelastic demand curve. The Pencast shows students when a decrease in the price of a good results in more and less revenue for firms. [Play Pencast]


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Elasticity and Changes in Equilibrium

This Pencast illustrates the effect of a decrease in supply (a leftward shift) on the equilibrium price and quantity of two goods, one that has a relatively elastic demand and another that has a relatively inelastic demand. The Pencast identifies the situation that has the relatively larger change in price and the relatively larger change in quantity. [Play Pencast]


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