TYPES OF ELASTICITY

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TYPES OF ELASTICITY We nay distinguish between the three types of elasticizes. Price Elasticity income and Cross Elasticity. Price Elasticity Price elasticity measures responsiveness (If potential buyers to change in price. I’ is the ratio of percentage change in quantity demanded iu scrupulous to a percentage change in price. (For fuller explanation see p. 116). Income Elasticity Income Elasticity is a […]

Meaning of Elasticity

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Meaning of Elasticity We have studied the law of demand and we have seen that there is an inverse relation between demand and price. change (rise or fall)in price leads generally to a change (contraction or extension) of demand. This attribute of demand by virtue of which it stretches or contracts under the pres rue of a change […]

Monetary Theory

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Monetary Theory  R. G. l lawtrcy was a firm believer in the 11I011- etary theory. According to him. \’,11iauons in flows of 1II1111e)arc the sole and sul] i~’icllt dctcruuuantx of business activity and account for alt(,lIIating phases of prosperity and depression. Non-monetary causes like drought. floods, earthquakes. wars. strikes. un balanced development (If certain industries, etc., can at best cause a P:II·ti••1 […]

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DOES DRUG INTERDICTION INCREASE OR DECREASE DRUG RELATED CRIME? A persistent problem facing our society is the use of illegal drugs, such as heroin, cocaine, ecstasy, and crack. Drug use has several adverse effects. One is that drug dependence can ruin the lives of drug users and their families. Another is that drug addicts often turn to […]

WHY DID OPEC FAIL TO KEEP THE PRICE OF OIL HIGH?

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WHY DID OPEC FAIL TO KEEP THE PRICE OF OIL HIGH? Many of the most disruptive events for the world’s economies over the past several decades have originated in the world market for oil. In the 1970s, members of the Organization of Petroleum Exporting Countnes (OPEC) decided to raise the world price of 011 to increase their […]

CAN GOOD NEWS FOR FARMING BE BAD NEWS FOR FARMERS?

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CAN GOOD NEWS FOR FARMING BE BAD NEWS FOR FARMERS? Let’s return to the question posed at the beginning of this chapter. What happens to wheat farmers and the market for wheat when university agronomists discover a new wheat hybrid that is more productive than existing varieties? Recall from Chapter 4 that we answer such questions in […]

THREE APPLICATIONS OF SUPPLY, DEMAND, AND ELASTICITY

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THREE APPLICATIONS OF SUPPLY, DEMAND, AND ELASTICITY Can good news for farming be bad news for farmers? Why did OPEC fail to keep the price of oil high? Does drug interdiction increase or decrease drug related crime? At first, these questions might seem to have little in common. Yet all three questions are about markets, and all […]

THE VARIETY OF SUPPLY CURVES

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THE VARIETY OF SUPPLY CURVES Because the price elasticity of supply measures the responsiveness of quantity supplied to the price, it is reflected in the appearance of the supply curve. Figure 5 shows five cases. In the extreme case of a zero elasticity, as shown in panel (a), supply is perfectly inelastic, and the supply curve is […]