{"id":99,"date":"2016-08-18T09:17:42","date_gmt":"2016-08-18T16:17:42","guid":{"rendered":"http:\/\/pages.palomar.edu\/jesteban\/?page_id=99"},"modified":"2016-12-02T10:31:17","modified_gmt":"2016-12-02T18:31:17","slug":"elasticity-lesson-1","status":"publish","type":"page","link":"https:\/\/pages.palomar.edu\/jesteban\/home\/elasticity-tutorial\/elasticity-lesson-1\/","title":{"rendered":"Elasticity Lesson 1"},"content":{"rendered":"<div id=\"pl-99\"  class=\"panel-layout\" ><div id=\"pg-99-0\"  class=\"panel-grid panel-no-style\" ><div id=\"pgc-99-0-0\"  class=\"panel-grid-cell\" ><div id=\"panel-99-0-0-0\" class=\"so-panel widget widget_sow-editor panel-first-child panel-last-child\" data-index=\"0\" ><div\n\t\t\t\n\t\t\tclass=\"so-widget-sow-editor so-widget-sow-editor-base\"\n\t\t\t\n\t\t>\n<div class=\"siteorigin-widget-tinymce textwidget\">\n\t<h2>Types of elasticity<\/h2>\n<p>In the Introduction to Elasticity we saw that Elasticity of Demand maybe elastic, inelastic or unit elastic.\u00a0 As the owner of a firm if you know what type of elasticity you have at your current prices - you may change the prices to increase your revenue.<\/p>\n<\/div>\n<\/div><\/div><\/div><\/div><div id=\"pg-99-1\"  class=\"panel-grid panel-no-style\" ><div id=\"pgc-99-1-0\"  class=\"panel-grid-cell\" ><div id=\"panel-99-1-0-0\" class=\"so-panel widget widget_sow-image panel-first-child panel-last-child\" data-index=\"1\" ><div\n\t\t\t\n\t\t\tclass=\"so-widget-sow-image so-widget-sow-image-default-8b5b6f678277-99\"\n\t\t\t\n\t\t>\n<div class=\"sow-image-container\">\n\t\t<img \n\tsrc=\"https:\/\/pages.palomar.edu\/jesteban\/wp-content\/uploads\/sites\/52\/2016\/08\/Demand-1.jpg\" width=\"660\" height=\"579\" srcset=\"https:\/\/pages.palomar.edu\/jesteban\/wp-content\/uploads\/sites\/52\/2016\/08\/Demand-1.jpg 660w, https:\/\/pages.palomar.edu\/jesteban\/wp-content\/uploads\/sites\/52\/2016\/08\/Demand-1-300x263.jpg 300w, https:\/\/pages.palomar.edu\/jesteban\/wp-content\/uploads\/sites\/52\/2016\/08\/Demand-1-342x300.jpg 342w\" sizes=\"(max-width: 660px) 100vw, 660px\" title=\"Demand\" alt=\"\" \t\tclass=\"so-widget-image\"\/>\n\t<\/div>\n\n<\/div><\/div><\/div><div id=\"pgc-99-1-1\"  class=\"panel-grid-cell\" ><div id=\"panel-99-1-1-0\" class=\"so-panel widget widget_sow-video panel-first-child panel-last-child\" data-index=\"2\" ><div\n\t\t\t\n\t\t\tclass=\"so-widget-sow-video so-widget-sow-video-default-c08170c47cfb-99\"\n\t\t\t\n\t\t>\n<div class=\"sow-video-wrapper\n\">\n\t\t\t<iframe loading=\"lazy\" title=\"ElasticityRangeRev\" width=\"584\" height=\"329\" src=\"https:\/\/www.youtube.com\/embed\/s7GrZNhz_W0?feature=oembed&enablejsapi=1\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen allowfullscreen mozallowfullscreen webkitallowfullscreen sandbox=\"allow-scripts allow-same-origin allow-presentation\"><\/iframe>\t<\/div>\n<\/div><\/div><\/div><\/div><div id=\"pg-99-2\"  class=\"panel-grid panel-no-style\" ><div id=\"pgc-99-2-0\"  class=\"panel-grid-cell\" ><div id=\"panel-99-2-0-0\" class=\"so-panel widget widget_sow-editor panel-first-child panel-last-child\" data-index=\"3\" ><div\n\t\t\t\n\t\t\tclass=\"so-widget-sow-editor so-widget-sow-editor-base\"\n\t\t\t\n\t\t>\n<div class=\"siteorigin-widget-tinymce textwidget\">\n\t<p>There are two extreme cases of elasticity:<\/p>\n<ul>\n<li>Perfectly inelastic demand - where the consumer is willing to pay any price to buy the product.\u00a0 This typically applies to health care (you would be willing to pay anything for heart surgery if it will save your life) or it may also apply to illegal drugs (where addicts are willing to do anything to get their drugs).<\/li>\n<li>Perfectly elastic demand - where the consumer is only willing to pay a certain price - if the price changes the consumer will not purchase the item.\u00a0 This is mainly a theoretical exercise\u00a0 Below are graphs that represent these extreme cases:<\/li>\n<\/ul>\n<\/div>\n<\/div><\/div><\/div><\/div><div id=\"pg-99-3\"  class=\"panel-grid panel-no-style\" ><div id=\"pgc-99-3-0\"  class=\"panel-grid-cell\" ><div id=\"panel-99-3-0-0\" class=\"so-panel widget widget_sow-image panel-first-child panel-last-child\" data-index=\"4\" ><div\n\t\t\t\n\t\t\tclass=\"so-widget-sow-image so-widget-sow-image-default-dbf295114b96-99\"\n\t\t\t\n\t\t>\n<div class=\"sow-image-container\">\n\t\t<img \n\tsrc=\"https:\/\/pages.palomar.edu\/jesteban\/wp-content\/uploads\/sites\/52\/2016\/08\/Ine-Elas-D.png\" width=\"435\" height=\"221\" srcset=\"https:\/\/pages.palomar.edu\/jesteban\/wp-content\/uploads\/sites\/52\/2016\/08\/Ine-Elas-D.png 435w, https:\/\/pages.palomar.edu\/jesteban\/wp-content\/uploads\/sites\/52\/2016\/08\/Ine-Elas-D-300x152.png 300w\" sizes=\"(max-width: 435px) 100vw, 435px\" title=\"ine-elas-d\" alt=\"\" \t\tclass=\"so-widget-image\"\/>\n\t<\/div>\n\n<\/div><\/div><\/div><\/div><div id=\"pg-99-4\"  class=\"panel-grid panel-no-style\" ><div id=\"pgc-99-4-0\"  class=\"panel-grid-cell\" ><div id=\"panel-99-4-0-0\" class=\"so-panel widget widget_sow-editor panel-first-child panel-last-child\" data-index=\"5\" ><div\n\t\t\t\n\t\t\tclass=\"so-widget-sow-editor so-widget-sow-editor-base\"\n\t\t\t\n\t\t>\n<div class=\"siteorigin-widget-tinymce textwidget\">\n\t<p>It is important to remember that elasticity provides information to maximize revenues - however in a typical demand curve the value of elasticity changes along the demand curve - relative elastic values at higher prices and relative inelastic at lower prices.\u00a0 The firm will maximize revenues when the value of elasticity is as close as possible to 1.<\/p>\n<h2>Practice Questions<\/h2>\n<ol>\n<li>The manager at the place you work wants to increase revenue by using elasticity and she has the data below:\n<table id=\"tablepress-23\" class=\"tablepress tablepress-id-23\">\n<thead>\n<tr class=\"row-1\">\n\t<th class=\"column-1\">PRICE of Good A<\/th><th class=\"column-2\">QUANTITY of Good B<\/th>\n<\/tr>\n<\/thead>\n<tbody class=\"row-striping row-hover\">\n<tr class=\"row-2\">\n\t<td class=\"column-1\">$[randnum min=\"40\" max=\"90\" id=\"c\" decimals=\"2\"]<\/td><td class=\"column-2\">[randnum min=\"10\" max=\"60\" id=\"e\"]<\/td>\n<\/tr>\n<tr class=\"row-3\">\n\t<td class=\"column-1\">$[randnum id=\"c\" multiply=\"1.25\" decimals=\"2]<\/td><td class=\"column-2\">[randnum id=\"e\" multiply=\"0.75\"]<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<!-- #tablepress-23 from cache --><\/li>\n<\/ol>\n<p>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Calculate the value of elasticity and advice the manager as to how to manipulate prices in order to maximize revenue.\u00a0 Explain how raising\/lowering prices increases revenue depending on whether the elasticity is greater than or less than one.<\/p>\n<p>\u00a0\u00a0\u00a0\u00a0 2. If the value of elasticity for gasoline is 0.80 - is gasoline a relatively elastic or inelastic good?\u00a0 Explain your answer.\u00a0 Would it be a good idea to raise taxes for gasoline in order to increase tax revenue?\u00a0 Why\/why not?\u00a0 Explain your answer.<\/p>\n<p>\u00a0\u00a0\u00a0\u00a0 3. Palomar College has done some research into parking fees and has determined that students will buy 10,000 parking permits at $40 - however if permits price is raised to $50 only 9,000 permits will be sold.\u00a0 What is the value of elasticity?\u00a0 Show your work!\u00a0 If the goal is to maximize revenue should Palomar charge $50?\u00a0 Or $40?\u00a0 Why?\u00a0 Explain your answer.<\/p>\n<p>\u00a0<\/p>\n<\/div>\n<\/div><\/div><\/div><\/div><\/div>","protected":false},"excerpt":{"rendered":"<p>Types of elasticityIn the Introduction to Elasticity we saw that Elasticity of Demand maybe elastic, inelastic or unit elastic.\u00a0 As the owner of a firm if you know what type of elasticity you have at your current prices &#8211; you &hellip; <a href=\"https:\/\/pages.palomar.edu\/jesteban\/home\/elasticity-tutorial\/elasticity-lesson-1\/\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":115,"featured_media":0,"parent":90,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"class_list":["post-99","page","type-page","status-publish","hentry"],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/pages.palomar.edu\/jesteban\/wp-json\/wp\/v2\/pages\/99","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pages.palomar.edu\/jesteban\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/pages.palomar.edu\/jesteban\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/pages.palomar.edu\/jesteban\/wp-json\/wp\/v2\/users\/115"}],"replies":[{"embeddable":true,"href":"https:\/\/pages.palomar.edu\/jesteban\/wp-json\/wp\/v2\/comments?post=99"}],"version-history":[{"count":18,"href":"https:\/\/pages.palomar.edu\/jesteban\/wp-json\/wp\/v2\/pages\/99\/revisions"}],"predecessor-version":[{"id":554,"href":"https:\/\/pages.palomar.edu\/jesteban\/wp-json\/wp\/v2\/pages\/99\/revisions\/554"}],"up":[{"embeddable":true,"href":"https:\/\/pages.palomar.edu\/jesteban\/wp-json\/wp\/v2\/pages\/90"}],"wp:attachment":[{"href":"https:\/\/pages.palomar.edu\/jesteban\/wp-json\/wp\/v2\/media?parent=99"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}