ECN 104 Lecture 4: Chapter 6 notes

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copperweasel398

15 Oct 2016

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Elasticity: measures how responsive one variable is to changes in another variable. Price elasticity of demand: the ratio of the percentage change in the quantity demanded to the percentage change in the price as we move along the demand curve. Measures how responsive quantity is to changes in demand, along a demand curve. The midpoint method is a technique for calculating the percent change. In this approach, we calculate changes in a variable compared with the average, or midpoint, of the starting and final values. (cid:883)(cid:882)(cid:882)| (cid:1842)(cid:1831)(cid:1830)=|% (cid:3018)% (cid:3017) (cid:883)(cid:882)(cid:882)| - > (cid:1867)(cid:1866) (cid:1842)(cid:1831)(cid:1830)=| (cid:3263)(cid:3280) (cid:3264)(cid:3279) (cid:3279) (cid:3264)(cid:3279) (cid:3279) (cid:3263)(cid:3280) (cid:3291)(cid:3278)(cid:3280) (cid:3290)(cid:3279) (cid:3291)(cid:3278)(cid:3280) (cid:3290)(cid:3279) (cid:3291)(cid:3278)(cid:3280) (cid:1839)(cid:1856) (cid:1868)(cid:1867)(cid:1866) (cid:1842)(cid:1831)(cid:1830)=| (cid:1840)(cid:1857)(cid:1875) (cid:1843)(cid:1830) (cid:1841)(cid:1856) (cid:1843)(cid:1856) (cid:1874) (cid:1843)(cid:1830) (cid:1840)(cid:1857)(cid:1875) (cid:1868)(cid:1855)(cid:1857) (cid:1867)(cid:1856) (cid:1868)(cid:1855)(cid:1857) (cid:1874) (cid:1842)(cid:1855)(cid:1857) The mid point method gives you the virtue of giving you a moderate, rather than an extreme estimate of elasticity. to avoid computing different elasticities for rising and falling prices we use the midpoint method.

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

In this question, we will determine the price elasticity of demand using both the coefficient of elasticity and the total revenue test.

Use the demand schedule in the table below to answer the following questions.

Quantity Demand	Price
10	200
20	150
30	100
40	50
50	25

a) Calculate the total revenue for each row in the demand schedule. indicate whether total revenue increases or decreases between each row int eh demand schedule. use the total revenue test to classify each price/quantity change as elastic, inelastic, or uni-elastic.

b) calculate the own price-elasticity coefficient for each row in the demand schedule. use the coefficients you calculate to classify each price/quantity change as elastic, inelastic, unit elastic.

in your answer it will be useful to recall that the midpoint formula for percentage change is:

%change midpoint = (final - initial) / ((finial + initial)/2)

and own price elasticity can be calculated by using the formula

Ed= (percentage change in quantity demand of product x) / (percentage change the in the price of product x)

fuchsiacoyote513

1. The concept of price elasticity of demand measures:

a. the slope of the demand curve.

b. the number of buyers in a market.

c. the extent to which the demand curve shifts as the result of a price decline.

d. the sensitiveness of quantities demanded to price changes.

2. When the percentage change in price is less than the resulting percentage change in quantity demanded:

a. demand is elastic.

b. demand is inelastic.

c. demand is unit elastic.

d. none of the above.

3. The elasticity of demand:

a. will be the same at each price-quantity combination on a stable demand curve.

b. tends to be elastic in high-price ranges and inelastic in low-price ranges.

c. tends to be inelastic in high-price ranges and elastic in low-price ranges.

d. is infinitely large for a perfectly inelastic demand curve.

4. Suppose that as the price of Y falls from $2.00 to $1.80 the quantity of Y demanded increases from 110 to 121. It can be concluded that the price elasticity of demand is: _______.

5. Total revenue rises as the price of a good increases if price elasticity of demand is:

a. unitary elastic

b. perfectly inelastic.

6. The demand for such products as salt, bread, and electricity tend to be:

a. relatively price elastic.

b. relatively price inelastic.

c. of unit price elasticity.

d. perfectly price elastic.

coffeeelephant81

ECN 104 Lecture 4: Chapter 6 notes

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