ECON101 Chapter Notes - Chapter 6: Price Ceiling, Economic Equilibrium

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lilachyena14

18 Mar 2013

School

University of Waterloo

Department

Economics

Course

ECON101

Professor

Shi Lei Niu

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The price elasticity of demand is a units-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buyers" plans remain the same. Price elasticity of demand = percentage change in q demanded / percentage change in p. Units-free measure because percentage change in each variable is independent of units which the variables are measured. When p of good rises, q demanded decreases. Positive change in price beings negative change in q -> price elasticity is negative. Absolute value of price elasticity = how responsive/elastic demand is. If q demanded remains constant when p changes, price elasticity of demand is zero = perfectly inelastic demand. If % change in q demanded = % change in p, then price elasticity is one = unit elastic demand. If elasticity of demand is between zero and 1 then inelastic demand.

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1. __________________ A measure of consumersâ sensitivity or responsiveness to changes in the price of a good or service.

2. ___________________ When the percentage change in price (in absolute value) is more than the percentage change in quantity demanded (in absolute value).

3. ___________________ When the percentage change in quantity demanded (in absolute value) is more than the percentage change in price (in absolute value).

4. ___________________ When the percentage change in quantity demanded (in absolute value) is just equal to the percentage change in price (in absolute value).

5. ___________________ Total amount paid to a producer for a good or service P * Q.

6. ___________________ The effect on total revenue of a change in price, holding quantity constant.

7. ___________________ The effect on total revenue of a change in quantity, holding price constant.

8. ___________________ An elasticity calculated over an interval of a demand curve or demand schedule.

9. ___________________ Elasticity at a specific price or point on a demand curve.

10. ___________________ A measure of how responsive quantity demanded is to a change in income, all other things constant.

11. ___________________ A measure showing how responsive the quantity demanded of one good is to changes in the price of another good, other factors constant.

12. ___________________ The additional revenue received by producing and selling one more unit of output.

13. ___________________ Units of output that could have been sold at a higher price had the firm not lowered its price to sell additional (marginal) units.

coffeehornet269

If the percentage change in the quantity demanded of a good is less than the percentage change in price, the price elasticity of demand is:

A) Elastic

B) Inelastic

C) Perfectly inelastic

D) Unitary elastic

byzantiummole828

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

ECON101 Chapter Notes - Chapter 6: Price Ceiling, Economic Equilibrium

ECON101 Full Course Notes

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