Elasticity and Total Revenues 11/11/11

• Higher prices do not necessarily lead to higher total revenue
• "Perfectly inelastic" - No change in Quantity Demanded regardless of price (impossible)
• No alternatives?
• No opportunity costs?
• "Income Elasticity of Demand" - % change in Quantity Demanded / % Change in income
• > 0 means the good is normal (as income increases, the quantity demanded of the good goes up)
• < 0 means the good is inferior (as income increases, the quantity demanded of the good goes down)
• How does income affect consumption?
• Quantity of goods
• Type of goods
• Cost - Something that consumes resources
• Must be an action
• To whom?