ECN 2020 Lecture 6: SET 6

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yellowcattle191

8 Jun 2017

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The percentage change in quantity demanded will be greater than the percentage change in price. What is the cross-price elasticity of demand for two goods that are unrelated? zero. Economists avoid confusion over units in the computation of elasticity by using: percentage changes. If the cross-price elasticity of demand between two products is -3. 0, then the two products are: complements. When you compute a price elasticity of demand the answer is always: negative. At current prices of a highly addictive drug the demand for the drug is highly price: inelastic. An increase in the price of a substitute for ipads will lead to __________ in the quantity demanded of ipads so the cross-price elasticity of demand will be __________. an increase, positive. The more substitutes that exist for a particular product, the __________ the price elasticity of demand. greater. If the income elasticity of suvs is greater than 1, what is the good considered? a luxury.

Related Questions

Match the following terms with their proper definitions.

Potential Matches:

1 : measures the responsiveness of the quantity supplied of a good to changes in the price of that good

2 : a formula that measures the responsiveness along a specific section (arc) of a supply or demand curve and measures the "average" price elasticity between two points on the curve.

3 : measures the responsiveness of the quantity supplied of a good to changes in the price of the related good

Answer

: Own-Price Elasticity of Supply

: Cross-Price Elasticity of Supply

: Arc Elasticity

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

a) What is the advantage of using the price elasticity rather than the slope of the demand curve or its inverse to measure the responsiveness in the quantity demanded of a commodity to a change in its price?

b) Why and how is the formula for arc price elasticity of demand different from the formula for point price elasticity of demand?

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ECN 2020 Lecture 6: SET 6

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