ECO 1001 Lecture Notes - Lecture 3: Root Beer, Independent Goods, Luxury Tax

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orchidduck298

16 Nov 2016

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Price elasticity of demand measures the responsiveness or sensitivity of consumers to a change in the price of a product. D = % in quantity demanded of product x/% in the price of product x. Say the price of a good drops from to and quantity demanded increases from 60 units to 100 units. Apple introduced the first generation iphone in june of 2007 at a price of . In august of 2007 apple reduced the price to and sold 22,500 units per day. How the product is defined (narrow vs. broad) Sale of an identical good to different consumers at different prices. Luxury tax- ineffective because elastic demand for these goods. Excise tax- on inelastic goods (alcohol, gas, etc. ) Price elasticity of supply measures the responsiveness or sensitivity of producers to a change in the price of a product. S = % in quantity supplied of product x/% in the price of product x.

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

Address the following:

Price elasticity of demand refers to the percentage change in demand resulting from a percentage change in price.

Please review the definition of relative inelasticity and relative elasticity. These terms refer to how much demand changes based on a change in price.

1) Choose any three products and classify and describe their price elasticity of demand; (relatively inelastic, relatively elastic, perfectly elastic, perfectly inelastic, or unitary elastic; your three product should illustrate different elasticities; ie: do not chose two relatively inelastic products)

2) Discuss what happens to the demand when the price changes for each of your items, specifically how much does demand change when the price changes?

3) Explain why demand changes the way it does for each of your three products

erinbuffalo510

From the scenario for Katrinaâs Candies, examine the procedure Herb will use to estimate the "demand model" for this product and comment on the expected price elasticity, income elasticity, and cross price elasticity of demand. That is, do you expect demand to be price elastic or inelastic? Will the income elasticity suggest Katrina Candies is a luxury or a necessary good? And, is there likely to be a strong cross price elasticity with the other products that Herb included in his demand model? Explain your answers. What can you determine about consumer demand for a product whose estimated demand elasticities are as follows: Price Elasticity of demand is -0.85 Income Elasticity of demand is 2.5 Cross Price Elasticity of demand with this product and your product is -2 I would like you to think about this simple formula for predicting the change in total revenue when there is a given percentage change in price. Using the example above, if ED (price elasticity of demand) is -.85, then a 10% increase in price will cause the quantity demanded to fall by 8.5%, (-8.5% / 10% = -.85). The Formula for Predicting % Changes in Total Revenue is: %ÎTR = %ÎQ + %ÎP where TR = Total Revenue, Q is Quantity Demanded and P = price. Using this formula, what would be the % Î in TR if ED is -.85 and the %ÎP is 10%?

lilaccattle807

ECO 1001 Lecture Notes - Lecture 3: Root Beer, Independent Goods, Luxury Tax

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