Elasticity > 1 In this case, the change in quantity demanded is proportionately larger than the change in price.

This means that an increase in price would result in a decrease in revenue, and a decrease in price would result in an increase in revenue. In the extreme case of near infinite elasticity, the demand curve would be nearly horizontal, meaning than the quantity demanded is extremely sensitive to changes in price. The case of infinite elasticity is described as being perfectly elastic and is illustrated below: 43.

THE ISOQUANT CURVE

A. The Isoquant curve contains all combinations of 2 inputs that produce the same total output. B. All points on an isoquant curve are technically efficient. C. The curve is bowed toward the origin because of the law of diminishing marginal productivity. D. The slope of the isoquant is called the "Marginal Rate of Technical Substitution" (MRTS) or the "Marginal Rate of Substitution (MRS). E. The absolute value of the MRS is equal to the Marginal Productivity of the input on the x-axis divided by the Marginal Productivity of the input on the y-axis. MRS = MPx/MPy F. As one moves down the isoquant, the MRS decreases. This is called the law of diminishing MRS. (It follows from the law of diminishing marginal productivity.) G. For every possible combination of inputs, there is an isoquant. The whole set of isoquants is called the "isoquant map". The "isoquant map" is a picture of the state of technology. 44. Tutorial: How to calculate the GDP The basic formula for calculating the GDP is:
Y = C + I + E + G where Y = GDP C = Consumer Spending

I = Investment made by industry E = Excess of Exports over Imports G = Government Spending

This formula is almost self-evident (if you take time to think about it)! GDP is a measure of all the goods and services produced domestically. Therefore, to calculate the GDP, one only needs to add together the various components of the economy that are a measure of all the goods and services produced. Many of the goods and services produced are purchased by consumers. So, what consumers spend on them (C) is a measure of that component. The next component is the somewhat mysterious quantity "I," or investment made by industry. However, this quantity is mysterious only because investment does not have its ordinary meaning. When calculating the GDP, investment does NOT mean what we normally think of in the case of individuals. It does not mean buying stocks and bonds or putting money in a savings account (S in the diagram). When calculating the GDP, investment means the purchases made by industry in new productive facilities, or, the process of "buying new capital and putting it to use" (Gambs, John, Economics and Man, 1968, p. 168). This includes, for example, buying a new truck, building a new factory, or purchasing new software. This is indicated in the diagram by an arrow pointing from one factory (enterprise) to another. In essence, it shows the factory "reproducing itself" by buying new goods and services that will produce still more new goods and services. 45.