ECON 1020 Lecture Notes - Lecture 1: Independent Goods

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scarletgoat894

7 Feb 2018

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Interpretation of elasticity of demand: > 1 demand is elastic, = 1 demand is unit elastic, < 1 demand is inelastic, total revenue = price x quantity, total revenue test. Applications of price elasticity of demand: large crop yields, inelastic demand, lower total revenue, excise taxes, inelastic demand, more total revenue, decriminalization of illegal drugs, inelastic demands, more total revenue. Inelastic supply, producers are not as responsive to price changes: measures sellers" responsiveness to price changes, elastic supply, producers are responsive to price changes, price elasticity of supply formula, = p(cid:2915)(cid:2928)(cid:2913)(cid:2915)(cid:2924)(cid:2930)a(cid:2917)(cid:2915) (cid:2919)(cid:2924) (cid:2927)(cid:2931)a(cid:2924)(cid:2930)(cid:2919)(cid:2930)(cid:2935) (cid:2929)(cid:2931)(cid:2926)(cid:2926)l(cid:2919)(cid:2915)(cid:2914) (cid:2925)(cid:2916) (cid:2926)(cid:2928)(cid:2925)(cid:2914)(cid:2931)(cid:2913)(cid:2930) x. Interpretation of elasticity of supply: > 1 supply is elastic, = 1 supply is unit elastic, < 1 supply is inelastic. Price elasticity of supply and time: time is primary determinant of elasticity of supply, time periods considered, immediate market period, short run, long run. Applications of elasticity of supply: antiques, inelastic supply, reproductions, more elastic supply, volatile gold prices, inelastic supply.

Related Questions

1. The concept of price elasticity of demand measures:

a. the slope of the demand curve.

b. the number of buyers in a market.

c. the extent to which the demand curve shifts as the result of a price decline.

d. the sensitiveness of quantities demanded to price changes.

2. When the percentage change in price is less than the resulting percentage change in quantity demanded:

a. demand is elastic.

b. demand is inelastic.

c. demand is unit elastic.

d. none of the above.

3. The elasticity of demand:

a. will be the same at each price-quantity combination on a stable demand curve.

b. tends to be elastic in high-price ranges and inelastic in low-price ranges.

c. tends to be inelastic in high-price ranges and elastic in low-price ranges.

d. is infinitely large for a perfectly inelastic demand curve.

4. Suppose that as the price of Y falls from $2.00 to $1.80 the quantity of Y demanded increases from 110 to 121. It can be concluded that the price elasticity of demand is: _______.

5. Total revenue rises as the price of a good increases if price elasticity of demand is:

a. unitary elastic

b. perfectly inelastic.

6. The demand for such products as salt, bread, and electricity tend to be:

a. relatively price elastic.

b. relatively price inelastic.

c. of unit price elasticity.

d. perfectly price elastic.

coffeeelephant81

In this question, we will determine the price elasticity of demand using both the coefficient of elasticity and the total revenue test.

Use the demand schedule in the table below to answer the following questions.

Quantity Demand	Price
10	200
20	150
30	100
40	50
50	25

a) Calculate the total revenue for each row in the demand schedule. indicate whether total revenue increases or decreases between each row int eh demand schedule. use the total revenue test to classify each price/quantity change as elastic, inelastic, or uni-elastic.

b) calculate the own price-elasticity coefficient for each row in the demand schedule. use the coefficients you calculate to classify each price/quantity change as elastic, inelastic, unit elastic.

in your answer it will be useful to recall that the midpoint formula for percentage change is:

%change midpoint = (final - initial) / ((finial + initial)/2)

and own price elasticity can be calculated by using the formula

Ed= (percentage change in quantity demand of product x) / (percentage change the in the price of product x)

fuchsiacoyote513

Discussion #1

The law of demand states that a fall in the price of a good raises the quantity demanded, and the increase in price leads to a decrease in quantity demanded. The price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. Demand for a good is said to be elastic if the quantity demanded responds substantially to changes in the price, and the percentage change in quantity demanded is greater than the percentage change in price. Demand is said to be inelastic if the quantity demanded responds only slightly to changes in the price, which indicates that the percentage in price is greater than the percentage in quantity demanded.

However, the extent of responsiveness of quantity demanded to a change in price depends on the nature of a particular good or service in the market. The price elasticity of demand partly depends on the availability of close substitutes. When a large number of substitutes are available, consumers respond to a higher price of a good by buying more of the substitute goods and less of the relatively more expensive good. In addition, goods or services that are considered necessities tend to have less elastic (more inelastic) demand, whereas goods or services that are considered luxuries have more elastic (less inelastic) demands.

Explain why the demand for the good or service provided by the organization you work for is elastic or inelastic. How does this influence pricing decisions?
Provide examples on how the availability of close substitutes affects price elasticity of demand.
Give specific examples of necessities or luxuries, and explain how they affect price elasticity of goods or services.

Please answer ALL bulletins and place the answers under the correct bulletin.

ECON 1020 Lecture Notes - Lecture 1: Independent Goods

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