ECON 040 Lecture Notes - Lecture 6: Normal Good, European Cooperation In Science And Technology, Chicken Fingers

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bronzegrasshopper664

22 Oct 2020

School

College of The Sequoias

Department

Economics (ECON)

Course

ECON 040

Professor

Kasun

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Document Summary

Number of substitutes- number of substitutes and elasticity move together. Time in which to make a purchase- time and elasticity move together. Proportion of income- proportion and elasticity move together. Luxuries vs necessities- need and elasticity move opposite. Total revenue- money earned from selling goods and services; not the same as. As price falls, quantity rises so what happens to tr, it depends on elasticity profit, which includes costs, tr=p*q. Elastic yields a big total revenue gain. Inelatic yields a small total revenue gain. Ed=1; a price change has no effect on tr. At the midpoint ed=1, and tr is maximized. When s is inelastic, changed causes a big changepe. When s is elastic, changed causes a big changeqe. To maximize utility-the satisfaction a consumer obtains from the consumption of a good or service. We cannot compare the utils assigned to a good by multiple people. We can compare the utils assigned to multiple goods by one person.

Related Questions

1. When demand is inelastic, a decrease in price will cause

a. an increase in total revenue.

b. a decrease in total revenue.

c. no change in total revenue but an increase in quantity demanded.

d.no change in total revenue but a decrease in quantity demanded.

2. For which of the following types of goods would the income elasticity of demand be positive and relatively large?

a. all inferior goods

b. all normal goods

c. goods for which there are many complements

d. luxuries

3. Which of the following should be held constant when calculating the income elasticity of demand?

a. the quantity of the good demanded

b. the price of the good

c. income

d. All of the above should be held constant.

4. Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

a. positive.

b. negative.

c. either positive or negative. It depends on whether A and B are normal goods or inferior goods.

d. either positive or negative. It depends on whether the current price level is on the elastic or inelastic portion of the demand curve.

5. As the price elasticity of supply increases, the supply curve

a. becomes flatter

b. becomes steeper

c. becomes downward sloping.

d. shifts to the right.

brownsea-lion330

PROBLEM SET ONE -2 - PRICE-ELASTICITY OF DEMAND

	P₁	P₂	Q_D1	Q_D2	I	II	III	IV	V
1	1	2	10	5
2	5	3	40	90
3	12	20	200	200
4	3	2	9	9
5	0.40	1.40	30	15
6	1.2	4.0	20	15
7	7.5	4.6	40	30
8	5	5.000â¦01	1x10⁶	0
9	5	4.9999â¦.	10	1x10⁹
10	6	12	12	6
11	18	36	360	180
12	7	15	24	16
13	7	16	78	78
14	25	65	150	100
15	65	91	1300	780
16	4	5	21	11
17	8	4	30	54
18	140	275	625	495
19	78	91	780	780
20	91	78	780	780

Column I - determine the Price-Elasticity of Demand Coefficient. Find material in Chapter 6 and the Powerpoint of Elasticity Chap 004 19e.ppt

change in quantity demanded change in price

E_D = ---------------------------------------- â ----------------------------

sum of quantities demanded / 2 sum of prices / 2

The data in the first four columns represent price (P) and quantity demanded (Qd) in time 1 (before change in price) and time 2 (after change in price). Note that results should be expressed in absolute terms (see paragraph Elimination of Minus Sign). For example, -1 should be expressed as â1â.

Column II â Based on topic concerning Interpretations of E_D, indicate which applies based on how the quantity demanded changed subsequent to a change in price (elastic, inelastic, etc.)

Column III - you need to determine if the good in question would be considered a necessity, a luxury or neither.

Column IV â Indicate, in monetary terms, how much is the change in total revenue or total expenditure (TR = P X Q_D), from the first price level to the second.

Column V - the direction of the change, also in monetary terms, that is, increasing or decreasing, and by how much? (show a + sign for increasing and a â sign for decreasing).

Note: for any monetary result please include the applicable currency symbol ($, â¬, etc.)

salmoneagle868

Determinates of Price Elasticity

K-Mart-- Determinants of demand elasticities

1. Generally, the elasticity of demand for a product will be greater when there are:

(a) the larger number of substitutes,
(b) the greater proportion of income an item takes,
(c) the less the item is considered to be a necessity, and
(d) the longer length of time allowed for adjustment to change the price of the good.

2. K-Mart, at its web-site, K-Mart.com posts a weekly sales circular on selected merchandise, organized by department. It must be concluded that the demand for these products are elastic. The decrease in price will increase total revenue. Check out this week's specials and, select ten items.

Answer these questions:
How many specials score 1 point (or 1 yes) for meeting the criterion of each determinant above.
Which specials score 4 points (or 4 yes) for meeting the criterion of each determinant above?
Which specials score 0 (or no yes)?
Why would K-Mart include any item that scored less than a 3 (or less than 3 yes) ?

If the product meets all the determinates of elasticity the more elastic the product. Such as a diamond necklace. So the necklace may go on sale or the store may offer unlimited cleaning of the diamonds or storage to encourage people to buy the necklace.

Whereas a product that meets a few of the determinates of elasticity are considered necessities.

For Example: Do not use any of my products.

Determinates	Dial Body Soap	Tide Laundry Det.	Cigarettes	Generic Heart Medication
Does the product have a large number of substitutes?	Yes/1pt.	Yes/1pt.	0	0
Does the product require a large proportion of your income?	0	0	0	0
Is the product a necessity?	0	0	Yes/1pt.	Yes/1pt.
Do you take a long time to think about buying the product?	0	0	0	0
Total for Each Product	1	1	1	1

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ECON 040 Lecture Notes - Lecture 6: Normal Good, European Cooperation In Science And Technology, Chicken Fingers

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