ECON 1011 Lecture Notes - Lecture 12: Marginal Utility, Demand Curve

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4 Oct 2018

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ECON 1011 Lecture Notes - Lecture 11: Trigonometric Functions, Marginal Utility, Demand Curve

ECON 1011 Lecture Notes - Lecture 12: Marginal Utility, Demand Curve

ECON 1011 Lecture Notes - Lecture 14: Budget Constraint

Document Summary

Demand curve and elasticity: on a graph for p, where the maximum value of q is a, is unit elastic, the part of the line above (cid:2870) is elastic, and the part below is inelastic. 2 extremes: when perfectly inelastic, = 0, when perfectly/infinitely elastic, = . For the above graph where the red line is d whose elasticity is and the blue line is. D" whose elasticity is ", whose elasticity is " > . For all points on this demand curve, elasticity is the same. Utility: measurement of happiness/satisfaction (measured in utils: eg. This morning you thought about getting coffee or a donut: the coffee provides 50 utils and the donut provides 30 utils, therefore, you would choose the coffee over the donut. If too much coffee (x-axis) is consumed, then your happiness (utlity; y-axis) would decrease after peaking at the top (satiation point). The utility you get from consuming 1 more unit. (utility change per unit)

Related Questions

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.

coffeeelephant81

1. If a 3 percent increase in price leads to a 5 percent increase in quantity supplied, then

a. Supply is unit elastic

b. Demand is inelastic.

c. Demand is elastic.

d. Supply is elastic.

e. Supply is inelastic.

2. Moving along a demand curve, the quantity demanded decreases 8 percent when price increases 10 percent.

The price elasticity of demand is calculated to be ________.

Given the price elasticity of demand calculated in part a, demand is ________ (elastic, inelastic or unitary elastic) along this portion of the demand curve.

3. Fill in the blanks:

When demand is elastic, the _______ effect dominates the _______ effect.

When demand is inelastic, the _______ effect dominates the _______ effect.

4. Use the following coordinates to answer the following questions.

(2400, $0), (1800, $3), (1000, $7), and (0, $12)

a. Find the arc price elasticity of demand over the price range from $3 to $7. Interpret the value of price elasticity.

the demand curve for a product is given by qxd = 1,200 - 3px - 0.1pz where pz = $300.

a. What is the own-price elasticity of demand when Px = $140? Is demand elastic or inelastic at this price? What would happen to the firm's revenue if it decided to charge a price below $140?

Own price elasticity:

If the firm prices below $140, revenue will: (increase, decrease or not change)

b. What is the own-price elasticity of demand when Px = $240? Is demand elastic or inelastic at this price? What would happen to the firm's revenue if it decided to charge a price above $240?

Own price elasticity:

If the firm prices above $240, revenue will:

c. What is the cross-price elasticity of demand between good X and good Z when Px = $140? Are goods X and Z substitutes or complements?

Cross-price elasticity: