ECON 1B03 Lecture Notes - Lecture 4: Ice Cream Cone, Substitute Good, Demand Curve

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ECON 1B03 Full Course Notes

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Elasticity: measures how responsive qd or qs is to changes in p and other determinants. This knowledge would be very useful to rms and policymakers whose decisions may affect price and therefore affect qd. Other things being equal, it will want to maximize its total revenue (assume this to be true in this course) The rm would like to sell as much as it could at the highest price it could get. But it wouldn"t want to charge a price so high that it loses customers and its revenue drops. Here"s where knowing the price elasticity of demand for its good is handy for a rm. People get upset by it, but they still buy the coffee everyday. Total revenue, tr, is de ned as price times the quantity trades. Price elasticity of demand: a measure of how much the quantity demanded of a good responds to a change in the price of that good.

Related Questions

A- Think of another good that you have purchased recently Be specific (e.g. is it breakfast cereal in general or Cheerios cereal specifically). If the price of this item increases, how would this affect the quantity of the good that you consume? Is the Demand for this good Price elastic or Price inelastic? Justify your classification by talking about the determinants of elasticity as they apply to this product. Say price is on the rise for this product and you are the manager of a store, would you be thrilled to be selling this product? Under what circumstances would you want to own a business that sells this product? In other words, how does an increase in price for this good affect your Total Revenue? Using specific examples, relate the concepts of Cross Elasticity and Income Elasticity to this product.

B- What changes do you make to your demand for gasoline when the prices start to climb up?

C- Would you want to own a business that sells price-elastic products or price-inelastic products? Why?

Think of another good that you have purchased recently (or you could continue with the good you selected in TDA I). Be specific (e.g. is it breakfast cereal in general or Cheerios cereal specifically). If the price of this item increases, how would this affect the quantity of the good that you consume? Is the Demand for this good Price elastic or Price inelastic? Justify your classification by talking about the determinants of elasticity as they apply to this product. Say price is on the rise for this product and you are the manager of a store, would you be thrilled to be selling this product? Under what circumstances would you want to own a business that sells this product? In other words, how does an increase in price for this good affect your Total Revenue? Using specific examples, relate the concepts of Cross Elasticity and Income Elasticity to this product

Think of a good product that you have purchased recently (or you could continue with the good you selected in TDA I). Be specific (e.g. is it breakfast cereal in general or Cheerios cereal specifically). If the price of this item increases, how would this affect the quantity of the good that you consume? Is the Demand for this good Price elastic or Price inelastic? Justify your classification by talking about the determinants of elasticity as they apply to this product. Say price is on the rise for this product and you are the manager of a store, would you be thrilled to be selling this product? Under what circumstances would you want to own a business that sells this product? In other words, how does an increase in price for this good affect your Total Revenue? Using specific examples, relate the concepts of Cross Elasticity and Income Elasticity to this product.

ECON 1B03 Lecture Notes - Lecture 4: Ice Cream Cone, Substitute Good, Demand Curve

ECON 1B03 Full Course Notes

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