Changes

Last class one student asked this question:  what are some example price elasticities of demand?  Recall the cutoff of 1:  price elasticity less than 1 is inelastic, and more than 1 is elastic.  Here are specific examples:

Last class one student asked this question:  what are some example price elasticities of demand?  Recall the cutoff of 1:  price elasticity less than 1 is inelastic, and more than 1 is elastic.  Here are specific examples:

*rice in Japan: 0.2 (inelastic because it is such a basic food there)

*rice in Japan: 0.2 (inelastic because it is a basic food there)

*travel by bus: 0.2 (inelastic because it is a necessity)

*travel by bus: 0.2 (inelastic because it is a necessity for bus travelers)

*cigarettes: 0.5 (inelastic because of the addiction)

*cigarettes: 0.5 (inelastic because of the addiction)

*gambling: 0.8 (inelastic because of the addiction)

*gambling: 0.8 (inelastic because of the addiction)

*whether the market is at "peak" or "off-peak" demand; people want airline tickets the day before Thanksgiving, when many people traveling, even if the price increases

*whether the market is at "peak" or "off-peak" demand; people want airline tickets the day before Thanksgiving, when many people traveling, even if the price increases

*the more narrowly defined a good is (e.g., a specific brand of hamburger rather than all hamburgers), the more price elastic it will be due to the availability of substitutes

*the more narrowly defined a good is (e.g., a specific brand of hamburger rather than all hamburgers), the more price elastic it will be due to the availability of substitutes

 

== Review: Returns to Scale ==

== Review: Returns to Scale ==