ECON 1115 Lecture Notes - Lecture 7: Breakfast Cereal, Sunscreen, Eggo

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cerisegiraffe538

3 Jun 2015

School

Northeastern University

Department

Economics

Course

ECON 1115

Professor

Gerald Porter( G)

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Document Summary

Econ 1115: principles of macroeconomics- lecture 7: elasticity. Elasticity: the measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants; how much one variable responds to changes in another variable. Price elasticity of demand: measures how much quantity demanded responds to a change in price. Price elasticity of demand= percentage change in quantity demanded. Percentage change= end value- start value x 100% start value. From a to b, p rises 25%, q falls 33%,elasticity = 33/25 = 1. 33. From b to a, p falls 20%, q rises 50%, elasticity = 50/20 = 2. 50. The standard method gives different answers depending on where you start. Midpoint method= end value- start value x 100% midpoint. The % change in p = -/ 225= 22. 2 % The % change in q = 12-8/10= 40% The price elasticity of demand depends on: The extent to which close substitutes are available.

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

1. Clothing retailers often use sales, where some or all products are sold at a discount price, to increase revenue. What does this suggest about the price elasticity of demand for retail clothing?

A) It is elastic.

B) It is inelastic.

C) It is unit elastic.

D) This tells us nothing about elasticity.

2. If demand is inelastic, then increasing price will do what to revenue?

A) It is impossible to say.

B) Decrease

C) Increase

D) Nothing will happen to revenue.

3. If P increases from 200 to 202 and Qd decreases from 50 to 49, what is the price elasticity of demand? ___

4. If elasticity (i.e. price elasticity of demand) is -3, a 1.5% increase in price would lead to what change in quantity demanded?

A) a decrease of 3%

B) a decrease of 4.5%

C) an increase of 1.5%

D) an increase of 3%

5. If you know that the demand curve is given by: Q = 20-2P What is the price elasticity of demand if P = 4?

A) -0.666

B) -0.33

C) -1.33

D) -1.66

29. Given the following demand and cost functions, determine the output and sales level that maximize profit.
Demand Function: Q = 25- P; Cost Function: TC = 20+5Q +Q2 (Points : 1) 20 Units
200 Units
5 Units
None of the Above

30. Assume the price of product B, increases from $1 to $1.50. As a result, the quantity demanded of product "A increases from 500 to 600 a month. This indicates that the cross-price elasticity and relationship between the two products. (Points : 1)

.50, Substitutes
.45, Substitutes
.45, Complements
.50, Complements
Products are not related

31. Given the marginal revenue from a product is $15 and the price elasticity of demand is -1.2, what is the price of the product? (Points : 1)

Not enough Information
$8
$88
$42
$68

32. Given the demand function: QD = -10-2.1 P +.62 Y. Where P is price and Y is Income (Points : 1)

For a 1% increase in price, quantity demanded falls by 2.1%
For a 1% increase in price, quantity demanded increases by .62%.
For a 1% decrease in price, quantity demanded increases by 2.72%
None of the above

ECON 1115 Lecture Notes - Lecture 7: Breakfast Cereal, Sunscreen, Eggo

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