Class Twenty Nine

Elasticity- Total Revenues

I.                    Total Revenues: Price X Quantity

When P rise, Q down and when P down, Q rise

Expenditure vs. Cost:

Expenditure is the total P X Q you spent

Cost is the things you sacrifice for a given quantity of good

II.                  “perfectly inelastic” (vertical line)

There are no such things as perfectly inelastic at all since perfectly inelastic implies there’re no substitutes at all.

III.                Income Elasticity of Demand

% change in quantity/ % change in income

>0 normal goods <0 inferior goods

IV． Cost (characterized from scarcity, since we need to do trade-off)

i.                     Actions

ii.                   To Whom?