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H. = H, = H (6) You are to assume that H , the long-run demand for housing, is equal to the demand for housing you found in p
r-r=b(y-7)+p- (2) The government is also concerned about inflation and decides to use fiscal policy to achieve its inflation
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3. OBJECTIV

a. Analyze how prices elasticities impact revenue b. Evaluate how elasticity can cause shifts in demand and supply.

c. Predict how the long run and short run impacts of elasticity affect equilibrium. d. Explain howthe elasticity of demand and supply determine the incidence of a tax on buyers and sellers.

Studying elasticities is useful for a number of reasons, pricing being most imporant. Let's explore how elasticity relater to revenue and pricing, both in the long run and short run.

LONG RUN VS. SHORT RUN IMPACT: Elasticities are often lower in the short run than in the long run. On the demand side of the market, it can sometimes be difficult to change in the short run but easier in the long run. consumption of energy is a clear example. In the short run it is not east for a person to make substantial changes in the energy consumption. May be you can carpool to work sometimes or adjust your home thermostat by a few degrees if the cost of energy rises, but that is about all.

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