UNIT 1 1/14/16

ELASTICITY OF DEMAND
*DEF- a measure of how consumer react to a change in price
                       1.) Elastic Demand( a demand that is very sensitive to a change in price)
**it is always greater than 1
E>1
                                              1. the product is not a necessity
                                              2.they are available to substitute
EXAMPLE:SODA,STEAKS,CANDY,FUR COATS
                       2.)  inelastic Demand
**less than one
E<1
                                              1. product is a necessitate
                                              2.there are few or no substitute
                                              3.people will buy no matter what
EXAMPLE: GAS,SALT,MILK, INSULIN/MEDICINE, TOOTH PASTE
                       3.) Unitary Demand
**always equal to 1
E=1


COSTS OF PRODUCTION

• FIXED COST:cost that doesn't change no matter how much is produced 
• VARIABLE COST: cost that rises or falls depending upon how much is produce 
• TOTAL REVENUE: total amount of money that a firm receives from selling goods and services
• FORMULAS:

                      TFC+TVC=TC
                      AFC+AVC=ATC
                      TFC/Q=AFC
                      TVC/Q=AVC
                      TC/Q=ATC
                      TFC=AFC x Q
                      TVC=AVC x Q
                      MC=NTC-OTC