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MACROECONOMICS: The branch of economics that studies the entire economy, especially such topics as aggregate production, unemployment, inflation, and business cycles. It can be thought of as the study of the economic forest, as compared to microeconomics, which is study of the economic trees.

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Lesson 11: Elasticity Basics | Unit 3: Measurement Page: 13 of 25

Topic: Doing The Numbers: Endpoint <=PAGE BACK | PAGE NEXT=>

  • Our task is to calculated the price elasticity of demand using the endpoint formula. I am presenting the endpoint formula for reference.

    endpoint
    elasticity
    =(Q2 - Q1)
    Q1
    ÷(P2 - P1)
    P1

  • Suppose the values for this formula are P1 = $2.49, Q1 = 5,447 unit of a given good (say Tacos), P2 = $1.99, Q2 = 6,608 units of Tacos

    endpoint
    elasticity
    =0.21 ÷ - 0.20=- 1.05

  • This value - 1.05 indicates that the a one percent decline in the price of Tacos results in a 1.05 percent increase in quantity demanded.


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SCREENING

When confronted by asymmetric information, the use of small bits of information, or indicators, that suggest more comprehensive information. Screening occurs when those with limited information try to identify indicators suggesting more complete information. It is used in markets with adverse selection and moral hazard, especially in labor markets and in the provision of insurance. Common methods of screening include aptitude tests, affiliations, past behavior, and personal characteristics. A related method is signalling.

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[What's This?]

Today, you are likely to spend a great deal of time driving to a factory outlet trying to buy either a coffee cup commemorating last Friday (you know why) or a wall poster commemorating the first day of spring. Be on the lookout for mail order catalogs with hidden messages.
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Rosemary, long associated with remembrance, was worn as wreaths by students in ancient Greece during exams.
"It is not fair to ask of others what you are unwilling to do yourself. "

-- Eleanor Roosevelt, diplomat, activist

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