ECON 2030 Chapter : Menu 26 Sept 16

7 views2 pages

azuremammoth471

15 Mar 2019

School

Department

Course

Professor

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

Document Summary

Today"s menu: monday 26 september 2016: business, practice problems, chapter 6: 1-4, 7-10, 12, 14, 15, 18-20, chapter 7: 1-3, 6-12, 14, 18. Substance: elasticity, price elasticity of demand measure of how buyers will respond to a given change in price with respect in the amount they are willing to pay. % change in price relationship is inverse. Longer time = more elastic: key: relationship with total revenue (ambiguous) total revenue = p times quantity demanded, goal is to raise total revenue. If price elastic in demand. (for a given % change in price, < %change in quantity demanded: tr = increase %p to super. If price goes down, and quantity go up, then tr goes down. decrease %q = decreased tr. <1 inelastic: elastic >1, inelastic <1, unit elastic = 1, definition , measure, determinant, graphically , time can"t build a house overnight example, incidence of taxation the burden of a tax.

Related Questions

The elasticity of demand for a product is likely to be greater:

(i) the smaller the number of substitute products available.

(ii) the greater the amount of time over which buyers adjust to a price change.

(iii) if the product is a necessity, rather than a luxury good.

(iv) the smaller the proportion of one's income spent on the product.

plummoose540

Which determinants influence whether demand is elastic or inelastic

I) advertising associated with the change in price

II) necessities versus luxury goods

III) the existence of substitutes

IV) the products and services used by people in the consumers' peer groups

V) share of the budget spent on the good

VI) time and the adjustment process

peachcrow879

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.

ECON 2030 Chapter : Menu 26 Sept 16

Document Summary

Get access

Related Documents

ECON 2030 Chapter : Menu 21 Sept 16

ECON 2030 Chapter : Menu 08 Feb 17

ECON 2030 Chapter : Menu 20 Sept 17

Related Questions