ECON 1050 Lecture Notes - Lecture 6: Normal Good

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yellowrhinoceros937

20 Dec 2016

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The smallest possible increase in price causes an infinity large decrease in quantity demanded. The percentage in the quantity demanded exceeds the percentage increase in price. The percentage decrease in the quantity demanded equals the percentage increase in price. The percentage decrease in the quantity demanded is less than the percentage increase in price. The quantity demanded is the same at all prices. The smallest possible increase in the price of one good causes an infinitely large increase in the quantity demanded of the other good. If the price of one good increases, the quantity demanded of the other good also increases. If the price of one good increases, the quantity demanded of the other good remains the same. If the price of one good increases, the quantity demanded of the other good decreases. The percentage increase in the quantity demanded is greater than the percentage increase in income.

Related Questions

If the percentage change in the quantity demanded of a good is less than the percentage change in price, the price elasticity of demand is:

A) Elastic

B) Inelastic

C) Perfectly inelastic

D) Unitary elastic

byzantiummole828

If the percentage change in quantity demanded is less than the percentage change in price, we would say that over this range, demand is:

elastic.
unit elastic.
inelastic.
perfectly elastic.

amethystsquirrel634

Discussion #1

The law of demand states that a fall in the price of a good raises the quantity demanded, and the increase in price leads to a decrease in quantity demanded. The price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. Demand for a good is said to be elastic if the quantity demanded responds substantially to changes in the price, and the percentage change in quantity demanded is greater than the percentage change in price. Demand is said to be inelastic if the quantity demanded responds only slightly to changes in the price, which indicates that the percentage in price is greater than the percentage in quantity demanded.

However, the extent of responsiveness of quantity demanded to a change in price depends on the nature of a particular good or service in the market. The price elasticity of demand partly depends on the availability of close substitutes. When a large number of substitutes are available, consumers respond to a higher price of a good by buying more of the substitute goods and less of the relatively more expensive good. In addition, goods or services that are considered necessities tend to have less elastic (more inelastic) demand, whereas goods or services that are considered luxuries have more elastic (less inelastic) demands.

Explain why the demand for the good or service provided by the organization you work for is elastic or inelastic. How does this influence pricing decisions?
Provide examples on how the availability of close substitutes affects price elasticity of demand.
Give specific examples of necessities or luxuries, and explain how they affect price elasticity of goods or services.

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ECON 1050 Lecture Notes - Lecture 6: Normal Good

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