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Line 67:
Line 67: − − Warning: for honors students only!
Economics Lecture Three (view source)
Revision as of 21:44, September 15, 2009
, 21:44, September 15, 2009→For Honors Students Only, Concerning Calculating Elasticities
==For Honors Students Only, Concerning Calculating Elasticities==
==For Honors Students Only, Concerning Calculating Elasticities==
There is an ambiguity in calculating the percentage change in price or quantity. What should be used as the denominator in deriving the percentages? If $100 increases to $110, then the percent change could be described as $10/$100 x 100% or $10/$110 x 100%. Above we used the initial price and quantity as the denominator, but we could have used the final price and quantity as the denominator instead.
There is an ambiguity in calculating the percentage change in price or quantity. What should be used as the denominator in deriving the percentages? If $100 increases to $110, then the percent change could be described as $10/$100 x 100% or $10/$110 x 100%. Above we used the initial price and quantity as the denominator, but we could have used the final price and quantity as the denominator instead.