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ECON 1001 Lecture Notes - Lecture 12: Shortage, Economic Equilibrium

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rubyllama377
27 Mar 2018
School
UC
Department
Economics
Course
ECON 1001
Professor
Erhardt

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Document Summary

A linear demand curve can be written as d (p) = a (cid:271)p (cid:1004)(cid:1095)p(cid:1095) a/(cid:271) This indicates that demand will become zero if the price is a/b and if the price is 0 demand is a and if the price is equal to a/b demand is 0. In the above equation a is the horizontal intercept and b is the slope of the demand curve. The slope of the demand curve measures the rate at which demand changes with respect to its price. It indicates the change in quantity for unit change in price. For example, if the equation is 1000 20 p and let us assume the price to be 10 ,20,30,40,50. 1000 2 0 (10) = 1000-200 = 800 similarly when it is 20 it would be 1000 20 (20) = 600. The equation 1000 is constant which is a and the value of q when p is zero.

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Related Questions

a) What is the advantage of using the price elasticity rather than the slope of the demand curve or its inverse to measure the responsiveness in the quantity demanded of a commodity to a change in its price?

b) Why and how is the formula for arc price elasticity of demand different from the formula for point price elasticity of demand?

Which of the following statements about price elasticity of demand is false?
 
a) The value of price elasticity of demand is the reciprocal of the value of the demand curve's slope
b) If quantity demanded changes by a larger percentage than the percentage change in price, demand is elastic
c) The value of price elasticity of demand along a downward sloping demand curve is always negative
d) A linear downward sloping demand curve has a varying price elasticity coefficient
 

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.