ECON 212 Lecture Notes - Lecture 2: Normal Good, Demand Curve

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10 Sep 2020

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Price elasticity measures the sensitivity of the quantity demanded to price. Price elasticity= the percentage change in quantity demanded/ the percentage change in price. Elasticity is the ratio of relative( or percentage) changes in quantity and price. Elasticity is not the slope of the demand curve. The slope is change in quantity demand/ change in price. Elasticity is the percentage change in demand/ percentage change in price. Elastic: 1% change in price leads to more than 1 percent change in demand. Inelastic: 1% change in price leads to less than 1 percent change in demand. Unit elastic: 1% change in price leads to 1% change in demand. Perfect inelastic: change in price leads to no change in demand. Perfect elastic: change in price leads to demand decrease to zero. Elasticities along the demand curve: linear demand curve. Q=a- bp b:the effect of price on quantity; a :the effect of all other factors that could potentially influence the demand curve.

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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.