ECON 101 Lecture 9: Econ_101_-_Lecture_9

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ochrehornet578

8 Jul 2020

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The concepts of price elasticity and income elasticity can help us understand many economic issues. The price elasticity of supply: the responsiveness of the quantity supplied to a change in price. Measurement: it is measured by the % change in the quantity supplied of a product the % change in the product"s price. Elastic supply if the price elasticity of supply is greater than 1. Inelastic supply - if the price elasticity of supply is less than 1. Unit- elastic supply - if the price elasticity of supply is equal to 1. Perfect elasticity of supply if the supply curve is a horizontal line it is perfectly elastic. This is when the quantity supplied is infinitively responsive to price changes and the price elasticity of supply equals infinity. I. e. a very small increase in price causes a very large increase in quantity supplied. Perfect inelasticity of supply if the supply curve is a vertical line it is perfectly inelastic.

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Elasticity is a measurement of how much a change in the price of a product or service will affect a change in the quantity demanded or supplied of that same product or service. The product or service can be unit elastic, inelastic, or elastic. The unit elastic response moves exactly in the direction of and in proportion to the change in price as would generally be the case with clothing. An inelastic response is one in which the change in quantity demanded or supplied is less than one-to-one as would the case with medication. An elastic response to a price change is one in which the change in quantity demanded or supplied is greater than one-to-one as would be the case with luxury goods.

(A). Why is the concept of elasticity useful to a business?

(B). What benefit can a business derive from an understanding of elasticity?

(C). (i)If the elasticity measurement indicates unit elastic response, what effect does this have on the firm's pricing policies?

(ii) If the elastic measurement indicates an inelastic response, what effect does this have on the firm's pricing policies?

(iii) If the elasticity measurement indicates an elastic response what effect does this have on the firm's pricing policies?

ivoryworm175

47. When a public transit system (such as a subway or bus line)raises its fares, it may experience an increase in total revenue.This suggests that demand is:
A) unstable.
B) price inelastic.
C) price elastic.
D) unit price elastic.
45. If the quantity demanded of agricultural output is veryunresponsive to a fall in price, the demand for agricultural outputis:
A) price elastic.
B) price inelastic.
C) positively sloped.
D) horizontal.
48. A constant price elasticity of demand curve is one whose:
A) slope is the same at every point on the curve.
B) price elasticity of demand is the same at every point on thecurve.
C) quantity is the same at every point on the curve.
D) price elasticity of demand and slope are the same at every pointon the curve.

49. Whenever supply increases, the resulting market price willalways be lower except:
A) when demand is perfectly price elastic (when the demand curve ishorizontal).
B) when demand is completely price inelastic (when the demand curveis vertical).
C) when supply is perfectly price inelastic (when the supply curveis vertical).
D) in the case of demand having unit price elasticitythroughout.

50. A demand curve that is perfectly inelastic:
A) will be vertical.
B) will be horizontal.
C) will be upward sloping.
D) has an elasticity equal to 1 everywhere on the curve.

greensquirrel343

1. If your tuition is $20,000 this semester, your books cost $1,000, you can only work 20 rather than 40 hours per week during the 15 weeks you are taking classes and you make $10 per hour, and your room and board are $5,000 this semester, what is your opportunity cost of attending college this semester? Assume that the board and lodging expenses will remain the same even if you do not go to college.
A. $24,000.
B. $26,000.
C. $21,000.
D. $29,000.

2. If a 5 percent change in the price of a good leads to a 10 percent change in the quantity supplied, then the supply of the good is ________ and the elasticity of supply is ________.
A. elastic; 0.5
B. inelastic; 2.0
C. inelastic; 0.5
D. elastic; 2.0

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ECON 101 Lecture 9: Econ_101_-_Lecture_9

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