ECON 1050 Chapter Notes - Chapter 4: Normal Good, Inferior Good

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3 Dec 2017

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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 buying plans remain the same. Perfectly inelastic demand - price elasticity of demand is 0, quantity demanded is constant. Unit elastic demand - price elasticity of demand is 1 (percent change in quantity demanded equals percent change in price) Inelastic demand - price elasticity of demand is between 0 and 1, (percent change of quantity demanded is less than the percent change in price) Elastic demand - percent change of quantity demanded exceeds the percent change in change in price) Perfectly elastic demand - percent change of quantity demanded changes to an infinitely large percentage in comparison to a small percent change in price. If price cut increases total revenue, demand is elastic. If price cut decreases total revenue, demand is inelastic. If price cut leaves total revenue unchanged, demand is unit elastic.

Related Questions

1. In each case below, what is the value of the price elasticity of demand? Is demand perfectly inelastic, inelastic, unit elastic, elastic or perfectly elastic?

a. Price falls by 10%, quantity demanded rises by 8%

b. Price rises by 3%, quantity demanded falls by 3%

c. Price rises by 1%, quantity demanded falls by 5%

d. Price rises by 5%, quantity demanded collapses to zero

e. Price falls by 2%, quantity demanded does not change

taupemule214

_____ is the measure of the percent change in the quantity of a good demanded divided by the percent change in the price of that good.

1. Law of demand

2. Quantifiable output

3. Inelastic demand

4. Price elasticity of demand

coraleagle749

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.

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ECON 1050 Chapter Notes - Chapter 4: Normal Good, Inferior Good

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