ECON 208 Lecture Notes - Lecture 4: Economic Equilibrium, Demand Curve, Grater

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Iv : elasticity: price elasticity of demand. Demand elastic when quantity demanded is very responsive to a change in the product"s own price. Elasticity ( ) = percentage change in quantity demanded / percentage change in price. > negative but use of the absolute value. Elasticity falls as you move down a linear demand curve. Or : ((q2-q1)/ average quantity) : ((p2-p1)/ average price) Degree of elasticity of demand affects more or less the changes in price and quantity of equilibrium. > the less responsive demand is, the more the curve will orientes towards vertical, and the less quantity of equilibrium will change. Price increases, but quantity demanded remains quite the same. > the more demand is elastic, the grater the change in equilibrium quantity and the less change in equilibrium price. The slope of a curve tells about how much the price have to change to cause a unit change in quantity demanded.

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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

Determine the price elasticity of demand at each quantity demanded using the arc or midpoint formula: Percentage change in quantity demanded =(Q2-Q1)/Q1 divided by percentage change in price= (P2-P1)/P1.

Redo the exercise using price changes of $10 rather than $5.

plumcockroach479

a. Determine the price elasticity of demand at each quantity demanded using the arc or midpoint formula: Percentage change in quantity demanded =(Q2-Q1)/Q1 divided by percentage change in price= (P2-P1)/P1.

b. Redo exercise using price changes of $10 rather than $5.

oliveant927

ECON 208 Lecture Notes - Lecture 4: Economic Equilibrium, Demand Curve, Grater

ECON 208 Full Course Notes

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