ECN 104 Lecture : Elasticity and its Application

38 views2 pages

crimsonraccoon314

13 Jan 2012

School

Ryerson University

Department

Economics

Course

ECN 104

Professor

Tsogbadral Galaabaatar

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Price elasticity of demand=percentage change in qs / percentage change in p y measures how much qd responds to a change in p y y disregard negative sign. Calculating percentage changes: y midpoint method y midpoint is the number halfway between the start & end values, the average. End value start value / midpoint x 100 of those values: doesn t matter which value you use as start or end . The variety of demand curves: y price elasticity of demand is closely related to the slope of the demand curve y the flatter the curve, the bigger the elasticity, the steeper the curve, the smaller the elasticity. Revenue = p x q y price increase has two effects on revenue: higher p means more revenue on each unit, but you sell fewer units (lower q) due to law of demand. Income elasticity of demand: measures the response of qd to change in consumer income.

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

8.5 Average visits per week equal 640 when the copayment is $40 and 360 when the copayment is $60.

a. Calculate the percentage change in visits, percentage change in price, and price elasticity of demand using 640 and $40 as the denominators for percentage change calculations.

b. Calculate the percentage change in visits, percentage change in price, and price elasticity of demand using 360 and $60 as the denominators for percentage change calculations.

c. Calculate the percentage change in visits, percentage change in price, and price elasticity of demand using 500 and $50 as the denominator for percentage change calculations. (This calculation finds the arc elasticity.)

d. How do your answers differ?

8.6 Sales are 3,100 at a price of $200 and 2,400 at a price of $300. Calculate the price elasticities of demand using $200 as the base value; then use $300 as the base value. Calculate the arc price elasticity and compare the three calculations. How do your answers differ?

The price elasticity of demand measures how much:

a. quantity demanded responds to a change in price

b. quantity demanded responds to a change in income

c. price responds to a change in demand

d. demand responds to a change in supply

yellowbee66

ECN 104 Lecture : Elasticity and its Application

Document Summary

Get access

Related Documents

ECN 104 Chapter Notes - Chapter 5: Breakfast Cereal, Ice Cream, Carpool

ECN 104 Lecture Notes - Lecture 4: Demand Curve, Normal Good

ECN 104 Lecture Notes - Demand Curve, Comparative Advantage, Opportunity Cost

Related Questions