ECON 50 Chapter Notes - Chapter 15: Normal Good, Inferior Good, Luxury Goods

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mauveimpala648

31 Mar 2017

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Slope of demand curve: change in quantity demanded over change in price. Price elasticity of demand: defined to be the change in percent of the quantity demanded in units of the good over the change in percent of the change in price. Elasticity of linear demand curve: at vertical intercept elasticity is infinite, at horizontal intercept it is 0, at the middle it will be equal 1. If good has absolute value of elasticity of demand greater than 1, then it has elastic demand. If good has absolute value less than 1 then it has inelastic demand. Unit elastic demand: when absolute value exactly 1. Elastic demand curve: very responsive to price. Elasticity of demand related to how many substitutable goods it has. Many close substitutes - very responsive to price, very elastic demand. Demand functions that are are of the natural log form have uniform unit elasticity throughout the curve.

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interval (or arc) elasticity

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price elasticity of demand

elastic demand

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inelastic demand

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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

Which of the following statements about price elasticity of demand is false?

a) The value of price elasticity of demand is the reciprocal of the value of the demand curve's slope

b) If quantity demanded changes by a larger percentage than the percentage change in price, demand is elastic

c) The value of price elasticity of demand along a downward sloping demand curve is always negative

d) A linear downward sloping demand curve has a varying price elasticity coefficient

crimsonreindeer712

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

ECON 50 Chapter Notes - Chapter 15: Normal Good, Inferior Good, Luxury Goods

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