ECN 104 Lecture Notes - Financial Statement, Lux, Kodak

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lemonyak528

24 Oct 2013

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Increase in price = decrease in quantity demand (vice versa) Elasticity = a measure of responsiveness of quantity to change in price. Elastic demand = qd responds strongly to change in p. Inelastic demand = qd responds weakly to change in p. Perfectly inelastic = no matter how much p is, q will never change. Perfectly elastic = if price increases, no one will buy. Tr changes opposite from price = demand is elastic. Tr changes same from price = demand is inelastic. Tr does not change when price change = demand is unit elastic. Discriminant of ed larger # of substitute = greater the price elasticity of demand. Independent goods near zero increase price of kodak photo paper = increase demand of canon paper increase price of digital camera = decrease demand for photo paper. Assessing competition strong competitors (cross elasticity = pos. ) increase price of coke = increase demand of sprite important info b/c coca cola owns both.

Related Questions

From the scenario for Katrinaâs Candies, examine the procedure Herb will use to estimate the "demand model" for this product and comment on the expected price elasticity, income elasticity, and cross price elasticity of demand. That is, do you expect demand to be price elastic or inelastic? Will the income elasticity suggest Katrina Candies is a luxury or a necessary good? And, is there likely to be a strong cross price elasticity with the other products that Herb included in his demand model? Explain your answers. What can you determine about consumer demand for a product whose estimated demand elasticities are as follows: Price Elasticity of demand is -0.85 Income Elasticity of demand is 2.5 Cross Price Elasticity of demand with this product and your product is -2 I would like you to think about this simple formula for predicting the change in total revenue when there is a given percentage change in price. Using the example above, if ED (price elasticity of demand) is -.85, then a 10% increase in price will cause the quantity demanded to fall by 8.5%, (-8.5% / 10% = -.85). The Formula for Predicting % Changes in Total Revenue is: %ÎTR = %ÎQ + %ÎP where TR = Total Revenue, Q is Quantity Demanded and P = price. Using this formula, what would be the % Î in TR if ED is -.85 and the %ÎP is 10%?

lilaccattle807

1. Assume a monopoly has the following demand schedule:

Price (P) Quantity (Q)

$20 200

15 300

10 500

5 700

(a) Calculate total revenue (TR) at each P and Q combination.

(b) Calculate marginal revenue per unit for each decrease in price.

(c) For the change in price from $20 to $15, calculate the interval elasticity of demand. Is demand elastic or inelastic?

(d) For the change in price from $20 to $15, obtain the Lerner index.

aquamarinetiger116

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

ECN 104 Lecture Notes - Financial Statement, Lux, Kodak

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