ECON 1050 Chapter 4: Econ – Chapter 4

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maroonsalmon544

9 Feb 2019

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Price elasticity of demand: a units-free measure of the responsiveness of the. Qd of a good to a change in its price. Price elasticity of demand = % change in qd. To calculate % change in price you need to find the average for 2 points on the curve. 5% =4 multiplied by another measured the absolute value of the number ignore the minus sign. When there is a positive change in price, there will be a negative change in. When elasticity = 0 (vertical demand curve), the qd remains constant when. Elasticity is the ratio of 2 percentage changes a proportionate change. % in each variable is independent of the units in which the variable is. Qd, so the price elasticity of demand will be a negative number so we use the price changes the good is said to have a perfectly inelastic demand: ex. Insulin (if price rises or falls, qd doesn"t change)

Related Questions

1. You own a pizza shop and you use both labor and capital to make your pizzas. Currently the marginal product of labor is 5 pizzas per hour, while the marginal product of you capital is 2 pizzas per hour. You pay your labour $10 per hour, and your capital costs you $5 per hour. The price of pizza is $2.50. Is you little shop using its inputs efficiently? Explain.

2. What is the difference between a profit and a rent? If a firm is interested in maximizing profits, why would it stay in an industry if profits are zero?

3. The âVintage Sistersâ collect old junk, fix it up, and sell it at craft fairs as a hobby. All of their costs are covered by their poor father who lets them use his shop, tools, and paint for free. When pricing their stuff, what elasticity of demand should they aim for? Why?

4. Solve for the equilibrium price and quantity (P* and Q*) both algebraically and graphically (using graph paper), for these four markets:

Market 1:

Q_D = 10 â P

Q_S = 5

Market 2:

Q_D = 10 â P

Q_S = 5 + P

Market 3:

Q_D = 10 â Â½ P

Q_S = 5 + 2 P

Market 4:

P = 10 â 2Q_D

Q_S = 1 + P

harlequinclam577

Suppose the market demand for pizza is given by Qd = 300 — 20P and the market supply for pizza is given by Qs = 20P — 100, where P = price (per pizza).

a. Graph the supply and demand schedules for pizza using $5 through $15 as the value of P.

b. In equilibrium, how many pizzas would be sold and at what price?

c. What would happen if suppliers set the price of pizza at $15? Explain the market adjustment process.

d. Suppose the price of hamburgers, a substitute for pizza, doubles. This leads to a doubling of the demand for pizza. (At each price, consumers demand twice as much pizza as before.) Write the equation for the new market demand for pizza.

e. Find the new equilibrium price and quantity of pizza.

violetyak236

1. Clothing retailers often use sales, where some or all products are sold at a discount price, to increase revenue. What does this suggest about the price elasticity of demand for retail clothing?

A) It is elastic.

B) It is inelastic.

C) It is unit elastic.

D) This tells us nothing about elasticity.

2. If demand is inelastic, then increasing price will do what to revenue?

A) It is impossible to say.

B) Decrease

C) Increase

D) Nothing will happen to revenue.

3. If P increases from 200 to 202 and Qd decreases from 50 to 49, what is the price elasticity of demand? ___

4. If elasticity (i.e. price elasticity of demand) is -3, a 1.5% increase in price would lead to what change in quantity demanded?

A) a decrease of 3%

B) a decrease of 4.5%

C) an increase of 1.5%

D) an increase of 3%

5. If you know that the demand curve is given by: Q = 20-2P What is the price elasticity of demand if P = 4?

A) -0.666

B) -0.33

C) -1.33

D) -1.66

ECON 1050 Chapter 4: Econ – Chapter 4

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