ECO 201 Lecture Notes - Lecture 9: Midpoint Method, Perfect Competition, Tax Incidence

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orchidpig108

23 Jul 2018

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Document Summary

Income elasticity of demand (cid:1851)= % (cid:3018)% (cid:1850)= % (cid:3018)(cid:3299)% (cid:3017)(cid:3300: k good normal (yd > 0 ) or inferior ((yd < 0 ) If the good is normal, is it: basic consumption good 0 < yd < 1, luxury yd > 1, cross price elasticity of demand. Xp > 0 goods are substitutes: elasticity of supply. = % (cid:3018)% (cid:3017: es always 0, measures the responsiveness of quantity supplied to a change in price. In the short run, producers are less able to change quantity supplied in response to price changes. Supply more inelastic in short run than in the long run. 0 < es < 1 (cid:894)% qs < % p(cid:895) In the long run, supply is more elastic (es > 1) Es = (long run industry supply curve under perfect competition) Capital: factory, tools and equipment used in production. Short run: period of time that is not long enough to change capital.

Related Questions

Price Elasticity		Income Elasticity		Cross-Price Elasticity
\|ep\| > 1	Elastic	ei < 0 ei > 0	Inferior good Normal good	ec < 0	Complementary good
\|ep\| < 1	Inelastic	0< ei < 1 ei > 1	Necessity Luxury	ec > 0	Substitute good
\|ep\| = 1	Unit Elastic

Technical Questions

Using the elasticity table (above), you have the following information for your product: (1) The price elasticity of demand is -2.0; (2) The income elasticity of demand is 1.5; and, (3) The cross-price elasticity of a related good is -3.5. What can you determine about consumer demand for your product from this information?â¨â¨

Using the elasticity table (above), you have the following information for your product: (1) The price elasticity of demand is -.9; (2) The income elasticity of demand is .5; and, (3) The cross-price elasticity of a related good is 2.0. What can you determine about consumer demand for your product from this information?

What are the three determinants of price elasticity of demand

What are the three determinants of price elasticity supply?

Name and describe the three kinds of product innovation.

Name and describe a marketing approach (that we discussed in class) that can be used to understand consumer behavior and/or estimate demand.

Name and describe a statistical approach (that we discussed in class) or technique that can be used to understand consumer behavior and/or estimate demand.

Name a psychological model (that we discussed in class) that can be used to understand consumer behavior and/or estimate demand.

Name and describe the six types of consumers.

How do fixed and variable costs differ in the short-run and long-run?

Jim is considering quitting his job and using his savings to start a small business. He expects that his costs will consist of a lease on the building, inventory, wages, electricity, and insurance.

11A. Identify which costs are explicit and which are opportunity (implicit) costs.

11B. Identify which costs are fixed and which are variable.

What is the law of diminishing returns? What are economies of scale and diseconomies of scale? Be sure to note the terms apply to the short run and the long run.

Application Questions

1. How can entrepreneurs shift elasticity of demand and elasticity of supply? Draw on the three determinants for each in your answer.

2. How can entrepreneurs be innovative in production for the short-term and the long-term? Draw on concepts like diminishing returns, diseconomies of scale, and economies of scale in your answer.