ECN 203 Lecture Notes - Lecture 6: Normal Good, Equilibrium Point, Demand Curve

23 views4 pages

ochreporpoise133

26 Feb 2017

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

To calculate what happens to the revenue - you need to calculate inelasticity. If product is elastic - the percentage change in quantity demanded is greater than the change in price. If product is inelastic - the percentage change in price is higher than the change in quantity demanded. Ex: if you raise the price of pizza, the quantity demanded by customers will decrease by a lot since there are a lot of choices. But if you raise the price of insulin, which is inelastic due to the necessity, the quantity demanded will not change as dramatically. Nonusers" demand for addictive substances is elastic. Not a necessity for them because they are not addicted. A moderately higher price will lead to a substantially smaller number of people trying a drug. Existing users" demand for addictive substances is inelastic. So even a substantial price rise brings only a modest decrease in the quantity demanded. The supply curve shifts to the left.

Related Questions

Discussion #1

The law of demand states that a fall in the price of a good raises the quantity demanded, and the increase in price leads to a decrease in quantity demanded. The price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. Demand for a good is said to be elastic if the quantity demanded responds substantially to changes in the price, and the percentage change in quantity demanded is greater than the percentage change in price. Demand is said to be inelastic if the quantity demanded responds only slightly to changes in the price, which indicates that the percentage in price is greater than the percentage in quantity demanded.

However, the extent of responsiveness of quantity demanded to a change in price depends on the nature of a particular good or service in the market. The price elasticity of demand partly depends on the availability of close substitutes. When a large number of substitutes are available, consumers respond to a higher price of a good by buying more of the substitute goods and less of the relatively more expensive good. In addition, goods or services that are considered necessities tend to have less elastic (more inelastic) demand, whereas goods or services that are considered luxuries have more elastic (less inelastic) demands.

Explain why the demand for the good or service provided by the organization you work for is elastic or inelastic. How does this influence pricing decisions?
Provide examples on how the availability of close substitutes affects price elasticity of demand.
Give specific examples of necessities or luxuries, and explain how they affect price elasticity of goods or services.

Please answer ALL bulletins and place the answers under the correct bulletin.

Assume the demand for plastic surgery is price inelastic. Are the following statements true or false? Explain.

a. When the price of plastic surgery increases, the number of operations decreases.

b. The percentage change in the price of plastic surgery is less than the percentage change in quantity demanded.

c. Changes in the price of plastic surgery do not affect the number of operations.

d. Quantity demanded is quite responsive to changes in price.

e. If more plastic surgery is performed, expenditures on plastic surgery will decrease.

f. The marginal revenue of another operation is negative.

peachhedgehog383

Question 16

If price is cut and demand is elastic, total revenue will rise because

		the change in quantity demanded is greater than the percent change in price.
		the percent change in quantity demanded is greater than the change in price.
		the percent change in quantity demanded is greater than the percent change in price.
		customers can't find substitutes.

3 points

Question 17

If price is cut and demand is inelastic, total revenue will fall because

		the change in quantity demanded is less than the percent change in price.
		the percent change in quantity demanded is less than the change in price.
		the percent change in quantity demanded is less than the percent change in price.
		customers can find substitutes.

3 points

Question 18

If something is addictive, then

price and demand are inversely related.

price elasticity of demand is equal to one.

demand is perfectly inelastic.

demand is perfectly elastic.

3 points

Question 19

In general, elasticities measure

		the change in quantity demanded when a product attribute changes.
		the change in consumer spending when income changes.
		the change in an attribute for a percentage change in price.
		the percentage change in the quantity demanded resulting from a fixed percentage change in some attribute.

3 points

Question 20

Average total costs are defined as

total costs divided by the change in output.

total costs divided by output.

the change in total costs when output changes.

average variable costs plus marginal costs.

3 points

Question 21

If a firm is experiencing economies of scale, then the long-run average cost curve is

falling.

rising.

horizontal.

shifting.

3 points

Question 22

If average total cost is rising

marginal cost is above average total cost.

marginal cost is rising.

marginal product is rising.

marginal cost is above average total cost and is falling.

3 points

Question 23

The period of time over which all inputs are variable is the

market horizon.

short run.

calendar year.

long run.

3 points

Question 24

The supply chain refers to

the supply curve.

the process of outsourcing.

the process of downsizing.

the process of creating and selling a product.

3 points

Question 25

When the capital (a fixed input) changes

short-run marginal costs rise.

short-run average total costs fall but do not shift.

labor inputs decline.

the short-run average total cost curve shifts.

3 points

Question 26

A market of price takers is called

perfectly competitive.

monopolistically competitive.

a monopoly.

an oligopoly.

3 points

Question 27

A market with a single seller is called

perfectly competitive.

monopolistically competitive.

a monopoly.

an oligopoly.

3 points

Question 28

A market that mainly stresses product differentiation is called

perfectly competitive.

monopolistically competitive.

a monopoly.

an oligopoly.

3 points

Question 29

Entry into a competitive market will continue until

economic profits are zero.

normal profits are zero.

when accounting losses are zero.

a. and b. are true

3 points

Question 30

Firms in an oligopoly

act independently.

engage in strategic behavior.

have perfect knowledge of the behavior of others.

openly collude.

ECN 203 Lecture Notes - Lecture 6: Normal Good, Equilibrium Point, Demand Curve

Document Summary

Get access

Related Documents

ECN 203 Lecture 6: ECON 203 Ch.5 Part 2

ECN 203 Lecture Notes - Lecture 8: Tax Wedge, Tax Incidence

ECN 203 Study Guide - Quiz Guide: Economic Equilibrium, Demand Curve, Marginal Cost

Related Questions

		price and demand are inversely related.
		price elasticity of demand is equal to one.
		demand is perfectly inelastic.
		demand is perfectly elastic.

		total costs divided by the change in output.
		total costs divided by output.
		the change in total costs when output changes.
		average variable costs plus marginal costs.

		marginal cost is above average total cost.
		marginal cost is rising.
		marginal product is rising.
		marginal cost is above average total cost and is falling.

		the supply curve.
		the process of outsourcing.
		the process of downsizing.
		the process of creating and selling a product.

		short-run marginal costs rise.
		short-run average total costs fall but do not shift.
		labor inputs decline.
		the short-run average total cost curve shifts.

		perfectly competitive.
		monopolistically competitive.
		a monopoly.
		an oligopoly.

		economic profits are zero.
		normal profits are zero.
		when accounting losses are zero.
		a. and b. are true

		act independently.
		engage in strategic behavior.
		have perfect knowledge of the behavior of others.
		openly collude.

		falling.
		rising.
		horizontal.
		shifting.

		market horizon.
		short run.
		calendar year.
		long run.