ECON 1000 Chapter 4: Elasticity

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2 Feb 2019

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Perfectly inelastic demand: when the percentage change in the quantity demanded is zero for any percentage change in the price. Inelastic demand: when the percentage change in quantity demanded is less than the percentage change in price: price elasticity of demand is less than 1, price rise increases total revenue; price cut decreases total revenue. Elastic demand: when the percentage change in quantity demanded exceeds the percentage change in price: price elasticity of demand is greater than 1, prise rise decreases total revenue; price cut increases total revenue. Total revenue: amount spent on a good and received by its seller and equals the price of a good multiplied by the quantity sold. Closeness of substitutes: the fewer the substitutes for a good or service, the more inelastic is the demand for it. For example, oil from which we make gasoline has substitutes, but none that are currently very close.

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

a) What is the advantage of using the price elasticity rather than the slope of the demand curve or its inverse to measure the responsiveness in the quantity demanded of a commodity to a change in its price?

b) Why and how is the formula for arc price elasticity of demand different from the formula for point price elasticity of demand?

lemonsea-lion739

1. Suppose the price elasticity of demand for bread is 1.00. If the price of bread falls by 20%, the quantity demanded will increase by:

2. Suppose that a 20% decrease in the price of good Y causes a 20% increase in demand for good X. The coefficient of cross-price elasticity of demand is:

3. When the price of a quart of milk increased from $1.55 to $2.00 the quantity demanded decreased from 21,000 per day to 19,000 per day. In this range, the price elasticity of demand is:

4. If the elasticity of supply for crude oil is 0.5, how much will the price have to increase to increase production by 20%?

5. Demand for X increases from 100 to 125 when the price of Y increases from $5 to $6. The cross-price elasticity of demand is:

6. Demand for X increases from 100 to 125 when the price of Y increases from $5 to $6. The cross-price elasticity of demand is:

scarletmammoth434

ECON 1000 Chapter 4: Elasticity

ECON 1000 Full Course Notes

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