ECON 2G03 Lecture Notes - Lecture 3: Intelligence Quotient

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whitecrab690

12 Sep 2016

School

McMaster University

Department

Economics

Course

ECON 2G03

Professor

Anastasios Papanastasiou

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Document Summary

B dp w measure of demand responsiveness with respect to a change in prices. First note that for a linear demand : In the previous example q= 30 - 0. 5 p and for dq = 2 . So the slope is a measure of demand responsiveness ie how q changes as p changes . The drawback is that this measure depends on the units in which q and p are measured. Example : demand for in canada gas is given by q = 30 . 0. 5 and q = in millions and p = cad then if p increases by 1 cad then the demand for gasoline would decrease by 0. 5 million gallons ( dp " Idea : we are interested in a unit . free measurement of demand responsiveness with respect to changes in price . if pt by 1% The price elasticity of demand is the percentage change in q for a l% increase in p.

Related Questions

At the current market equilibrium, the price of a good equals $40, and the quantity equals 10 units. At this equilibrium, the price elasticity of supply is 2.0. Assume that the supply curve is linear.

a. Use the price elasticity and market equilibrium to find the supply curve (Hint: the supply curve has the following form: q = a + (dq/dp)p. First, find the value of dq/dp; then, find the value of a.

b. Calculate the producer surplus in the market.

c. Imagine that a policy results in the price falling from $40 to $30. By how much does producer surplus fall?

d. What fraction of the lost producer surplus is due to the reduction in the quantity supplied, and what fraction is due to the fall in price received per unit sold?

scarlethyena149

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

The demand curve for a good is very unlikely to be perfectly vertical because

A) scarcity and limited income restrict the ability of consumers to afford goods as they become very expensive.
B) as the price of a good rises to high enough levels, the incentive for other suppliers to invent new substitutes for the good increases.
C) consumers generally do not care about the price of the goods they consume.
D) both a and b are true.

As the period for firms to expand output is lengthened, the elasticity of the market supply curve will

A) approach zero.
B) increase.
C) decrease.
D) remain the same since time does not affect the elasticity of market supply.

The price elasticity of demand for automobiles measures the responsiveness of

A) consumer purchases to a change in the price of automobiles.
B) consumer purchases to a change in the quality of automobiles.
C) supplier production levels to a change in the price of automobiles.
D) consumer purchases of automobiles to a change in their income.

Which of the following is true regarding the price elasticity of demand?

A) Demand is generally more elastic in the long run than in the short run.
B) Along a single demand curve, demand elasticity decreases as you move down the curve (to lower prices).
C) a flatter demand curve (has a less steep slope) is relatively more elastic than a demand curve that has a steeper slope.
D) All of the above are true.

5. (Answer ONE of the Following Question)

Economists maintain that the price of a product does not affect demand. How can this be true?
National defence is considered a public good because there appear to be no limits to the nonrivalry-in-consumption characteristic, and exclusion of nonpayers is impossible. Are there any other goods that so perfectly meet both public goods criteria?
Congressman Local stuff always votes for a balanced budget amendment to the U.S. Constitution. He also always votes for spending bills supported by the leadership of his political party. Is this rational?

carminecheetah752

ECON 2G03 Lecture Notes - Lecture 3: Intelligence Quotient

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