ECO101H1 Lecture 7: Elasticity Price and Demand

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11 May 2017

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Eco100 lecture 7 : elasticity, price and demand. The slope is still different - price elasticity is still different. Demand curve with lowest slope (absolute value) has higher price elasticity of demand. P and q are same where two demand curves intersect, but the slope varies. Suppose know 2 points on demand curve, calculate elasticity using mid-point convention. If you know the slope of demand curve you can calculate elasticity at any point on the curve. Percentage change in demand per percentage change in price. In response to increase in price, total revenue: Reason so much time is spent on elasticity. Revenue increase: (second price - first price) * quantity 1. Revenue decrease: price 1 * (quantity 1 - quantity 0) Elastic: slope less than 1, bigger than 0. Inelastic: slope over 1, less than infinity. Do not raise price: was the rom being nice to visitors when reducing admission prices in 2011.

Related Questions

Which of the following statements is true?

If demand is linear, slope will vary across different points on the demand curve whereas the elasticity will be the same at all points on the curve.

Elasticity does not depend on units whereas slope does.

The data needed to know the demand curve's entire slope are more likely to be available than the data needed to calculate elasticity at a given price.

Price elasticity of demand and slope are two names for the same concept.

harlequinmule901

1. The concept of price elasticity of demand measures:

a. the slope of the demand curve.

b. the number of buyers in a market.

c. the extent to which the demand curve shifts as the result of a price decline.

d. the sensitiveness of quantities demanded to price changes.

2. When the percentage change in price is less than the resulting percentage change in quantity demanded:

a. demand is elastic.

b. demand is inelastic.

c. demand is unit elastic.

d. none of the above.

3. The elasticity of demand:

a. will be the same at each price-quantity combination on a stable demand curve.

b. tends to be elastic in high-price ranges and inelastic in low-price ranges.

c. tends to be inelastic in high-price ranges and elastic in low-price ranges.

d. is infinitely large for a perfectly inelastic demand curve.

4. Suppose that as the price of Y falls from $2.00 to $1.80 the quantity of Y demanded increases from 110 to 121. It can be concluded that the price elasticity of demand is: _______.

5. Total revenue rises as the price of a good increases if price elasticity of demand is:

a. unitary elastic

b. perfectly inelastic.

6. The demand for such products as salt, bread, and electricity tend to be:

a. relatively price elastic.

b. relatively price inelastic.

c. of unit price elasticity.

d. perfectly price elastic.