01:220:102 Chapter Notes - Chapter 6: Midpoint Method, Demand Curve, Plus And Minus Signs

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01:220:102 Chapter Notes - Chapter 1: Gross Domestic Product, Lemonade Stand, Marginalism

01:220:102 Chapter Notes - Chapter 2: Comparative Advantage, Absolute Advantage, Income Distribution

01:220:102 Chapter Notes - Chapter 6: Midpoint Method, Demand Curve, Plus And Minus Signs

Document Summary

Elasticity: measurement of how an economic variable responds to change in another. Price elasticity of demand; a demand curve is elastic when a change in price causes a lot of change in quantity demand. Inelastic: when price change has little to no effect on quantity demand(large slope) Minus sign is implied because demand curve is negatively sloped. Replaces usual definition of the percent change in a variable with a slightly. Absolute change: actual quantity change, different from percentage(increase of ) Perfect inelastic: vertical line, quantity demand/supply same for all prices. Perfect elastic: horizontal line, price same for all quantities. Unit elasticity: change in price generates a proportional change in demand, resulting in no change in total revenue. Inelastic: price and tr move in same direction. Elastic: price and tr move in opposite direction. Unit elastic: tr does not move at all with price change. Price effect: after price increase, price per unit also increase, so revenue goes up.

Related Questions

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

Address the following:

Price elasticity of demand refers to the percentage change in demand resulting from a percentage change in price.

Please review the definition of relative inelasticity and relative elasticity. These terms refer to how much demand changes based on a change in price.

1) Choose any three products and classify and describe their price elasticity of demand; (relatively inelastic, relatively elastic, perfectly elastic, perfectly inelastic, or unitary elastic; your three product should illustrate different elasticities; ie: do not chose two relatively inelastic products)

2) Discuss what happens to the demand when the price changes for each of your items, specifically how much does demand change when the price changes?

3) Explain why demand changes the way it does for each of your three products

erinbuffalo510

1. If a 3 percent increase in price leads to a 5 percent increase in quantity supplied, then

a. Supply is unit elastic

b. Demand is inelastic.

c. Demand is elastic.

d. Supply is elastic.

e. Supply is inelastic.

2. Moving along a demand curve, the quantity demanded decreases 8 percent when price increases 10 percent.

The price elasticity of demand is calculated to be ________.

Given the price elasticity of demand calculated in part a, demand is ________ (elastic, inelastic or unitary elastic) along this portion of the demand curve.

3. Fill in the blanks:

When demand is elastic, the _______ effect dominates the _______ effect.

When demand is inelastic, the _______ effect dominates the _______ effect.

4. Use the following coordinates to answer the following questions.

(2400, $0), (1800, $3), (1000, $7), and (0, $12)

a. Find the arc price elasticity of demand over the price range from $3 to $7. Interpret the value of price elasticity.

01:220:102 Chapter Notes - Chapter 6: Midpoint Method, Demand Curve, Plus And Minus Signs

01:220:102 Chapter Notes - Chapter 1: Gross Domestic Product, Lemonade Stand, Marginalism

01:220:102 Chapter Notes - Chapter 2: Comparative Advantage, Absolute Advantage, Income Distribution

01:220:102 Chapter Notes - Chapter 6: Midpoint Method, Demand Curve, Plus And Minus Signs

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