ECO 1104 Lecture 5: ECO1104 LECTURE5 - MARKETS

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whitemanatee506

21 Sep 2018

School

University of Ottawa

Department

Economics

Course

ECO 1104

Professor

Cristina Blanco-Perez

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ECO 1104 Lecture Notes - Lecture 4: Opportunity Cost, Comparative Advantage

ECO 1104 Lecture 5: ECO1104 LECTURE5 - MARKETS

ECO 1104 Lecture Notes - Lecture 6: Economic Equilibrium, Demand Curve, Equilibrium Point

Document Summary

Eco 1104 lecture 5- markets we can find markets in a market economy. A market refers to the buyers and sellers who trade a particular good or service. They can be located locally, globally, or even virtually. A special class of markets is the competitive market: fully informed, price-taking buyers and sellers easily trade a standardized good or service: four characteristics of perfectly competitive markets: Participants are price takers in the market there are buyers and sellers: The demand can be represented as a demand schedule or a demand curve. A demand schedule displays the quantities demanded at various prices. The demand curve illustrates the relationship between the quantity demanded and the price of the good holding all of the other non-price determinants constant. If one of the non-price factors that determines demand changes, the demand curve will shift: the five most important non-price determinants of demand are: Price of related goods: substitutes, complements:

Related Questions

1. When demand is inelastic, a decrease in price will cause

a. an increase in total revenue.

b. a decrease in total revenue.

c. no change in total revenue but an increase in quantity demanded.

d.no change in total revenue but a decrease in quantity demanded.

2. For which of the following types of goods would the income elasticity of demand be positive and relatively large?

a. all inferior goods

b. all normal goods

c. goods for which there are many complements

d. luxuries

3. Which of the following should be held constant when calculating the income elasticity of demand?

a. the quantity of the good demanded

b. the price of the good

c. income

d. All of the above should be held constant.

4. Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

a. positive.

b. negative.

c. either positive or negative. It depends on whether A and B are normal goods or inferior goods.

d. either positive or negative. It depends on whether the current price level is on the elastic or inelastic portion of the demand curve.

5. As the price elasticity of supply increases, the supply curve

a. becomes flatter

b. becomes steeper

c. becomes downward sloping.

d. shifts to the right.

brownsea-lion330

When quantity demanded decreases in response to a change in price,

A. the demand curve shifts to the right.
B. the demand curve shifts to the left.
C. there is a movement down along the demand curve.
D. there is a movement up along the demand curve.
E. the supply curve shifts to the right.

The price elasticity of demand is the measure of the responsiveness of the demand for a good to a percentage change in the price of that same good. When the demand for a good changes due to an increase or decrease in the price of the good, it can be said that the good has a price elastic demand. On the other hand, a good whose demand is not significantly affected by a change in the price levels is price inelastic. For example, luxury goods are usually price elastic because these are not something that most people really need. Thus, when the price of luxury goods increases, the demand for such goods falls. Goods that fall within the latter category are usually the basic necessities such as food and prescription medicine. Even when these types of goods become pricier, most people would find ways to afford them because they need those items to survive.