MGE 302 Study Guide - Midterm Guide: Normal Good, Demand Curve, Marginal Revenue

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graychimpanzee669

8 Apr 2019

School

University at Buffalo

Department

Management Economics

Course

MGE 302

Professor

Matthew Green

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Document Summary

Calculating price elasticity of demand: price elasticity- slope of demand ( q/ p) times ratio of price to quantity (p/q) P q: price elasticity can be measured at an interval/arc along demand, or at specific point on the demand curve, price change relatively small- point calculation, price change spans a sizable arc along demand curve- interval calculation. Computation of elasticity over an interval: when calculating price elasticity of demand over an interval of demand- use interval/arc elasticity formula. Computation of elasticity at a point: multiply the slope of demand ( q/ p), computed at point of measure, times ratio p/q, using values of p and q at point of measure, depends of whether demand is linear or curvilinear. Point elasticity when demand is linear: given q = a + bp + cm + dpr, let income & price of the related good take specific values.

Related Questions

interval (or arc) elasticity

cross-price elasticity

price elasticity of demand

elastic demand

income elasticity

inelastic demand

inframarginal units

marginal revenue

point elasticity

price effect

quantity effect

total revenue

unitary elastic demand

1. __________________ A measure of consumersâ sensitivity or responsiveness to changes in the price of a good or service.

2. ___________________ When the percentage change in price (in absolute value) is more than the percentage change in quantity demanded (in absolute value).

3. ___________________ When the percentage change in quantity demanded (in absolute value) is more than the percentage change in price (in absolute value).

4. ___________________ When the percentage change in quantity demanded (in absolute value) is just equal to the percentage change in price (in absolute value).

5. ___________________ Total amount paid to a producer for a good or service P * Q.

6. ___________________ The effect on total revenue of a change in price, holding quantity constant.

7. ___________________ The effect on total revenue of a change in quantity, holding price constant.

8. ___________________ An elasticity calculated over an interval of a demand curve or demand schedule.

9. ___________________ Elasticity at a specific price or point on a demand curve.

10. ___________________ A measure of how responsive quantity demanded is to a change in income, all other things constant.

11. ___________________ A measure showing how responsive the quantity demanded of one good is to changes in the price of another good, other factors constant.

12. ___________________ The additional revenue received by producing and selling one more unit of output.

13. ___________________ Units of output that could have been sold at a higher price had the firm not lowered its price to sell additional (marginal) units.

coffeehornet269

From the scenario for Katrinaâs Candies, examine the procedure Herb will use to estimate the "demand model" for this product and comment on the expected price elasticity, income elasticity, and cross price elasticity of demand. That is, do you expect demand to be price elastic or inelastic? Will the income elasticity suggest Katrina Candies is a luxury or a necessary good? And, is there likely to be a strong cross price elasticity with the other products that Herb included in his demand model? Explain your answers. What can you determine about consumer demand for a product whose estimated demand elasticities are as follows: Price Elasticity of demand is -0.85 Income Elasticity of demand is 2.5 Cross Price Elasticity of demand with this product and your product is -2 I would like you to think about this simple formula for predicting the change in total revenue when there is a given percentage change in price. Using the example above, if ED (price elasticity of demand) is -.85, then a 10% increase in price will cause the quantity demanded to fall by 8.5%, (-8.5% / 10% = -.85). The Formula for Predicting % Changes in Total Revenue is: %ÎTR = %ÎQ + %ÎP where TR = Total Revenue, Q is Quantity Demanded and P = price. Using this formula, what would be the % Î in TR if ED is -.85 and the %ÎP is 10%?

lilaccattle807

18.

A firm faces the following demand:

Q = 144 - 0.42P

The firm's cost function is:

C = 3Q² + 164Q + 1,285

Find the quantity, Q, that maximizes profit. Round your answer to one decimal.

16.

Demand is given by:

Q = 2000 - 116P + 2P^' + 18Y, and P = 6, P^' = 6, and Y = 4

Calculate the Price Elasticity of Demand at P = 6? Round your answer to two decimal places.

15.

The cross-price elasticity of demand for a good is 0.8, and consumers currently purchase 118 units of the good.

Find the change in units demanded when the price of the related good changes 9 percent. Round your answer to one decimal place.

13.

Suppose you are told that the total revenue and cost functions are:
R(Q) = 22Q² + 13Q + 64
C(Q) = 9Q² + 21Q + 34

What is the profit (or loss) when Q = 48? Round your answer to one decimal place.

taupeeel656

MGE 302 Study Guide - Midterm Guide: Normal Good, Demand Curve, Marginal Revenue

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