MGEA02H3 Study Guide - Demand Curve, Product Rule, 21 Questions

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lemondinosaur451

4 Jun 2013

School

UTSC

Department

Economics for Management Studies

Course

MGEA02H3

Professor

all

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MGEA02H3 Full Course Notes

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Knowledge summary: elasticity: measures the % change in q for a 1% change in p. E = % change in q / % change in p: formulas: Dtr/ dq = p (1 1/ed) given p and ed, want to know the change in tr for one unit change in. Dtr / dp = q (1 ed) given q and ed, want to know the change in tr for one unit change in. P: elasticity of supply and demand can be used to calculate the share of taxes between consumers and suppliers. Ed / es = supplier"s share of taxes / consumer"s share of taxes. Consumer"s share of taxes + supplier"s share of taxes = tax imposed by government. From the relationship, we can see that the more elastic the demand, the less tax burden the consumer will bear: elasticity is the measure of responsiveness of one thing to another.

Related Questions

interval (or arc) elasticity

cross-price elasticity

price elasticity of demand

elastic demand

income elasticity

inelastic demand

inframarginal units

marginal revenue

point elasticity

price effect

quantity effect

total revenue

unitary elastic demand

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

PROBLEM SET ONE -2 - PRICE-ELASTICITY OF DEMAND

	P₁	P₂	Q_D1	Q_D2	I	II	III	IV	V
1	1	2	10	5
2	5	3	40	90
3	12	20	200	200
4	3	2	9	9
5	0.40	1.40	30	15
6	1.2	4.0	20	15
7	7.5	4.6	40	30
8	5	5.000â¦01	1x10⁶	0
9	5	4.9999â¦.	10	1x10⁹
10	6	12	12	6
11	18	36	360	180
12	7	15	24	16
13	7	16	78	78
14	25	65	150	100
15	65	91	1300	780
16	4	5	21	11
17	8	4	30	54
18	140	275	625	495
19	78	91	780	780
20	91	78	780	780

Column I - determine the Price-Elasticity of Demand Coefficient. Find material in Chapter 6 and the Powerpoint of Elasticity Chap 004 19e.ppt

change in quantity demanded change in price

E_D = ---------------------------------------- â ----------------------------

sum of quantities demanded / 2 sum of prices / 2

The data in the first four columns represent price (P) and quantity demanded (Qd) in time 1 (before change in price) and time 2 (after change in price). Note that results should be expressed in absolute terms (see paragraph Elimination of Minus Sign). For example, -1 should be expressed as â1â.

Column II â Based on topic concerning Interpretations of E_D, indicate which applies based on how the quantity demanded changed subsequent to a change in price (elastic, inelastic, etc.)

Column III - you need to determine if the good in question would be considered a necessity, a luxury or neither.

Column IV â Indicate, in monetary terms, how much is the change in total revenue or total expenditure (TR = P X Q_D), from the first price level to the second.

Column V - the direction of the change, also in monetary terms, that is, increasing or decreasing, and by how much? (show a + sign for increasing and a â sign for decreasing).

Note: for any monetary result please include the applicable currency symbol ($, â¬, etc.)

salmoneagle868

Question 1

If economic profits are zero

		accounting profits is less than the cost of capital.
		accounting profit is just covering the cost of capital.
		the cost of capital is negative.
		the entrepreneur should go to his/her next best alternative.

3 points

Question 2

Markets provide

information.

prices.

incentives.

all of these choices.

3 points

Question 3

The entrepreneur is always searching for

positive profit.

normal profit.

accounting profit.

economic profit.

3 points

Question 4

Social regulations can create

a more competitive market place.

network externalities.

a lower HHI.

barriers to entry.

3 points

Question 5

According to economic theory, profits are maximized where

total revenue equals total cost.

marginal revenue equals marginal cost.

price and average cost are equal.

where marginal product and average cost are equal.

3 points

Question 6

Brand names help

create commodities.

maintain market power.

create competition.

keep economic profits at zero.

3 points

Question 7

Entry of new firms causes

accounting profits to go to zero.

market share to grown.

economic profits to go to zero.

total revenue to be maximized.

3 points

Question 8

Fixed costs

do not vary with output

vary with output

do not vary with price

vary with price

3 points

Question 9

Variable costs

do not vary with price.

do not vary with output.

vary with price.

vary with output.

3 points

Question 10

Value maximization means

		that managers make decision so as to increase the long-run market value of the financial claims on the firm.
		that a firm should make products that have the highest price.
		that managers make decision so as to increase the short-run market value of the financial claims on the firm.
		all of these choices.

3 points

Question 11

A manager can determine if her product is viewed as a normal good or an inferior good by considering

price elasticity.

cross elasticity.

income elasticity.

advertising elasticity.

3 points

Question 12

If demand is perfectly elastic,

		the smallest increase in price will cause quantity demanded to fall to zero.
		the smallest increase in price will cause demand to fall to zero.
		the smallest increase in price will cause quantity demanded to fall.
		the smallest increase in price will cause demand to fall.

3 points

Question 13

If demand is perfectly elastic, then

demand and price are inversely related.

quantity demanded and price are inversely related.

the demand curve is a vertical line.

the demand curve is a horizontal line.

3 points

Question 14

If price elasticity is 3.25 then

		for every one percent change in price, there will be a 3.25 percent change in quantity demanded.
		for every one percent change in price, there will be a 3.25 percent change in demand.
		for every one percent change in price, there will be a 32.5 percent change in quantity demanded.
		for every one percent change in price, there will be a .0325 percent change in quantity demanded.

3 points

Question 15

If price elasticity is 3.25, then demand is

inelastic.

elastic.

unitary.

negative.

MGEA02H3 Study Guide - Demand Curve, Product Rule, 21 Questions

MGEA02H3 Full Course Notes

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Related Questions

		positive profit.
		normal profit.
		accounting profit.
		economic profit.

		a more competitive market place.
		network externalities.
		a lower HHI.
		barriers to entry.

		total revenue equals total cost.
		marginal revenue equals marginal cost.
		price and average cost are equal.
		where marginal product and average cost are equal.

		create commodities.
		maintain market power.
		create competition.
		keep economic profits at zero.

		accounting profits to go to zero.
		market share to grown.
		economic profits to go to zero.
		total revenue to be maximized.

		do not vary with output
		vary with output
		do not vary with price
		vary with price

		do not vary with price.
		do not vary with output.
		vary with price.
		vary with output.

		price elasticity.
		cross elasticity.
		income elasticity.
		advertising elasticity.

		demand and price are inversely related.
		quantity demanded and price are inversely related.
		the demand curve is a vertical line.
		the demand curve is a horizontal line.

		information.
		prices.
		incentives.
		all of these choices.

		inelastic.
		elastic.
		unitary.
		negative.