ECN 104 Lecture Notes - Lecture 6: Demand Curve, Substitute Good, Complementary Good

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3 Nov 2016

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Cross-price elasticity: measures the effect of the change in one good"s price on the quantity demanded of another good. Exy = % change in quantity demanded of good x. % change in price of good y a substitute good will yield a positive number a complementary good will yield a negative number an independent good will yield a number close to zero. Income elasticity of demand: measures how strongly demands responds to change in income, percent change in the quantity of a good demanded when a customer"s income changes divided by the percent change in the customer"s income. % change in income a normal good will yield a positive number an inferior good will yield a negative number. Price elasticity of supply: measures the responsiveness of the quantity supplied to a change in the price of a good when all other in uences on selling plans remain unchanged.

Related Questions

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

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

a. When demand is inelastic, an increase in price causes quantity demanded to ____ and TR to ____.

b. When demand is elastic, a decrease in price causes quantity demanded to ____ and TR to ____.

c. When demand is unitary elastic, an increase in price causes quantity demanded to ___ and TR to ____.

d. If the price falls and total revenue stays the same, demand must be _____.

e. If price rises and total revenue falls, demand must be _____.

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ECN 104 Lecture Notes - Lecture 6: Demand Curve, Substitute Good, Complementary Good

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