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ECN 104 Lecture 4: ECN 104 - Lecture 4 - Elasticity

Ecn 104 lecture 4: measure of how much buyers and sellers respond to changes in market conditions. Elasticity: the measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants. The price elascity of demand and its detreminants. Price elasticity of demand = % change in quantity demand/ % change in price. If u try calculation ped btwn two points on a demand curve, you will realize tht the elasticity from pt a to py b is diff from pt b to pt a. If the elasticity is exactly 1, so that quantity moves the same amount proportinatley as price, demand is said to have unit elasticity. Total revenue and the price elasticity of demand: total revenue: price x quantity, total revenue changes depending on the price elasticity of demand. Total revenue and the price elasticity of demand: when demand is inelastic, increase in price causes increase in total revenue and vice versa.

Canada

Introductory Microeconomics

Economics

Frank Trimnell

Ryerson University

Introductory Management Accounting

Introductory Macroeconomics

Principles of Marketing

<p>a) What is the advantage of using the price elasticity rather than the slope of the demand curve or its inverse to measure the responsiveness in the quantity demanded of a commodity to a change in its price?</p>
<p>b) Why and how is the formula for arc price elasticity of demand different from the formula for point price elasticity of demand?</p>

<div style="text-align: justify;">In general, elasticity is a measure of </div>
<div style="text-align: justify;"> </div>
<div style="text-align: justify;">a. the extent to which advances in technology are adopted by producers.</div>
<div style="text-align: justify;">b. the extent to which a market is competitive. </div>
<div style="text-align: justify;">c. how firms' profits respond to changes in market prices. </div>
<div style="text-align: justify;">d. how much buyers and sellers respond to changes in market conditions.</div>

<p><table> <tbody> <tr> <td>Match the following terms with their proper definitions.</td> </tr> </tbody> </table> <table> <tbody> <tr> <td>Potential Matches:</td> </tr> <tr> <td>1 : measures the responsiveness of the quantity supplied of a good to changes in the price of that good</td> </tr> <tr> <td>2 : a formula that measures the responsiveness along a specific section (arc) of a supply or demand curve and measures the "average" price elasticity between two points on the curve.</td> </tr> <tr> <td>3 : measures the responsiveness of the quantity supplied of a good to changes in the price of the related good</td> </tr> </tbody> </table> <table> <tbody> <tr> <td> Answer</td> </tr> <tr> <td> : Own-Price Elasticity of Supply</td> </tr> <tr> <td> : Cross-Price Elasticity of Supply</td> </tr> <tr> <td> : Arc Elasticity</td> </tr> </tbody> </table></p>

ECN 104 Lecture 4: ECN 104 - Lecture 4 - Elasticity

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