EC120 Chapter Notes - Chapter 5: Demand Curve

51 views2 pages

bronzefrog950

27 Sep 2016

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

carminegrasshopper545 and 38337 others unlocked

EC120 Full Course Notes

Verified Note

30 documents

Document Summary

Numerical measure of how much one variable responds to a change in another variable. Elasticity of 2 variables, x and y % change in x/% change in y=elasticity of x and y. Measures how much quantity demanded responds to a change in price. Price elasticity of demand= % change in qd/ % change in p. Measures how much quantity supplied responds to a change in price. Price elasticity of supply=% change in qs/ % change in price. Inelastic e < 1, elastic demand e > 1, unit elastic is equilibrium e=1. To calculate the elasticity between 2 points on a demand curve (q1,p1) and (q2,p2) All price elasticity answers will be written as positive answers. % change in x/% change in y=elasticity of x and y. As income rises, how much more do we demand of a good. Inferior goods(negative e), necessities(e < 1), luxury goods (e > 1)

Related Questions

The price elasticity of demand measures how much:

a. quantity demanded responds to a change in price

b. quantity demanded responds to a change in income

c. price responds to a change in demand

d. demand responds to a change in supply

yellowbee66

Discussion #1

The law of demand states that a fall in the price of a good raises the quantity demanded, and the increase in price leads to a decrease in quantity demanded. The price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. Demand for a good is said to be elastic if the quantity demanded responds substantially to changes in the price, and the percentage change in quantity demanded is greater than the percentage change in price. Demand is said to be inelastic if the quantity demanded responds only slightly to changes in the price, which indicates that the percentage in price is greater than the percentage in quantity demanded.

However, the extent of responsiveness of quantity demanded to a change in price depends on the nature of a particular good or service in the market. The price elasticity of demand partly depends on the availability of close substitutes. When a large number of substitutes are available, consumers respond to a higher price of a good by buying more of the substitute goods and less of the relatively more expensive good. In addition, goods or services that are considered necessities tend to have less elastic (more inelastic) demand, whereas goods or services that are considered luxuries have more elastic (less inelastic) demands.

Explain why the demand for the good or service provided by the organization you work for is elastic or inelastic. How does this influence pricing decisions?
Provide examples on how the availability of close substitutes affects price elasticity of demand.
Give specific examples of necessities or luxuries, and explain how they affect price elasticity of goods or services.

Please answer ALL bulletins and place the answers under the correct bulletin.

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

EC120 Chapter Notes - Chapter 5: Demand Curve

EC120 Full Course Notes

Document Summary

Get access

Related Documents

EC120 Chapter Notes - Chapter 5: Midpoint Method, Demand Curve, Breakfast Cereal

EC120 Lecture Notes - Demand Curve, Margarine, Unit

EC120 Lecture Notes - Lecture 3: Time Horizon, Tax Incidence, Price Ceiling

Related Questions