Womack Report

February 27, 2007

Microeconomics, February 27

Filed under: Economics,Notes,School — Phillip Womack @ 2:11 pm

Nuwal showed up late again today. Then, walked out of class to go get something he forgot, by the looks of things. I’m expecting to get our test results back today. We’ll see how that goes. I expect to do fine, but only due to outside knowledge, not because the tested material had much to do with material covered in class.Class starts with tests being handed back at 1:13.

98 on the test. Missed three questions, but only 50 of 52 questions counted for the score, so that leaves 49/50. Not unexpected.

1:42, actually starting lecture. Maybe. Reviewing the test took perhaps twenty minutes. The remainng ten minutes or so were consumed by Nuwal threatening to report another student for something or other, or to drop him from the class.

Back to measurement of elasticity of demand. Four methods of measurement:

  1. Proportionate method
  2. Percentage method
  3. Linear method, also called point method
  4. Mid-point method, also called arc method

The proportionate method of measuring elasticity of demand is calculated by dividing the proportionate change in quantity demanded by the proportionate change in price. This can be expressed as Ed = change in quantity demanded / change in price = ( (Q – Q1) / Q) / ( (P – P1) / P ). Elasticity of demand is always considered a positive value, so if the result of that value is negative, ignore the negativity.

The percentage method of calculating elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price.

The linear method of measuring elasticity of demand is calculated by dividing the relative length of the upper portion of a demand curve by the relative length of the lower portion of that same demand curve.  In demand curve AB, where C is a point on the curve, Ed = BC / AC.  If C is the midpoint of the curve, the elasticity of demand of C will always be 1.  As C moves towards the X axis, it elasticity of demand will go down.  As C moves towards the Y axis, elasticity of demand will increase.

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