Ch 5

Chapter five began to introduce more mathematical methods, but still kept a huge focus on conceptual and graphical understanding.

                We were introduced to elasticity, which is the measure of the change of quantity demanded or quantity supplied to one of its determinants, and applied to demand is referred to price elasticity of demand; applied to supply is referred to price elasticity . So the price of elasticity of demand measures how much the quantity demanded responds to changes in the price, and price of elasticity of supply measures how much the quantity supplied responds to changes in the price. If the elasticity is less than one, the quantity demanded/supplied moves proportionately less than the price (inelastic), when it is one, the quantity demanded/supplied moves perfectly with the price, just about at equilibrium, and when it is greater than one, the quantity demanded/supplied moves proportionately more than the price (elasticity). Using a time horizon , supplied/demand tend to be more elastic in long runs than in short ones, where people can gradually pick something up or stop buying it, and where sellers can change their productions, close shops, or even more sellers come into the scene.

                Total revenue is the total amount paid for a good, measured by the price of good multiplied by the total amount of the good sold. For the inelastic, it falls as price rises, and for the elastic demand curve, it falls as the price rises.