Goals
After completing this module, you will be able to do the following:
Discuss price elasticity of demand and how it is calculated.
Explain the usefulness of the total revenue test for price elasticity of demand.
List the factors that affect price elasticity of demand and describe some applications of price elasticity of demand.
Describe price elasticity of supply and how it can be applied.
Apply cross elasticity of demand and income elasticity of demand.
Define and explain the relationship between total utility, marginal utility, and the law of diminishing marginal utility.
Describe how rational consumers maximize utility by comparing the marginal utility-to-price ratios of all the products they could possibly purchase.
Explain how a demand curve can be derived by observing the outcomes of price changes in the utility-maximization model.
