19. How Elasticity of Demand Affects Total Revenue Review See  Micro Review 1
      A. Elasticity of demand measures the responsiveness of quantity demanded 
           to changes in price, income, and the price of related goods.
      B. Price elasticity of demand is the effect of price changes on  quantity demanded. 
      C. Coefficient of elasticity of demand for product x measures its price elasticity.   

      D. Interpreting Elasticity of demand

Relative Change in Quantity

Terminology

E Parameters

None, will pay anything, numerator is  zero.

Perfectly Inelastic

E = 0

Small

Inelastic

0 < ED < 1

 demanded and P change same percentage

Unitary Elasticity

ED = 1

Large

Elastic

1 < E <

Infinitely Large, p no change, denominator is 0

Perfectly Elastic

E is undefined, can't divide by zero.

E . Total Revenue Test

   

When Price Increases

Total Revenue

ED   >1

Somewhat
Elastic

Quantity Changing a Lot so you could lose lots of money.

decreases

ED = 1

Unitary
Elasticity

Quantity/Price Changing Same %

no change

ED <1

Somewhat Inelastic

Quantity Doesn't Change Much, so you could make lots of money

increases