ECON 200 Lecture Notes - Lecture 4: Demand Curve, Inferior Good, Substitute Good

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pucemouse259

14 Dec 2019

School

University of Arizona

Department

Economics

Course

ECON 200

Professor

Chandini Sankaran

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ECON 200 Full Course Notes

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Inverse (negative) relationship between price (p) and quantity demanded(qd) Consumers like low prices, if price drops buyers buy more. Consumers do not like high prices, if price raises, buyers buy less. Illustrates the negative relationship between the price and qd of a good. Shows the relationship between the p and qd in the market. Qd depends on p; so qd is a function of price. Qd=x intercept - (inverse slope * p) Change in quantity demanded vs. change in demand- Movement along the same demand curve, caused by change in p. Demand curve shifts to the left (decrease in demand) or right (increase in demand) Substitutes (price of one good goes up, demand of a substitute good goes up) Related goods (price goes up of dif good, demand down of related good) Normal good (income goes up, demand goes up) Inferior good (income goes up, demand goes down)

Related Questions

Suppose the market demand curve for pizza can be expressed as QD = 100 - 2P + 3Pb, where QD is the quantity of pizza demanded, P is the price of pizza, and Pb is the price of a burrito. What is the relationship between burritos and pizza, from the point of view of consumers?

a. They are independent.

b. They are substitutes.

c. Not enough information to answer the question.

d. They are complements.

For the following demand function, Q_D = 100 - P, answer the following questions

a. what is the point elasticity of demand at P = 80?

b. what is the point elasticity of demand at P = 20?

c. at what price is demand unitary price elastic?

d. demand is price elastic for prices between __________ and ___________

e. Consider your answer to part d., what happens to revenues as prices decrease within

this range? Are marginal revenues positive, constant, or negative in this range of

prices?

f. demand is price inelastic for prices between __________ and ___________

g. Consider your answer to part f., what happens to revenues as prices decrease within

this range? Are marginal revenues positive, constant, or negative in this range of

prices?

h. How many units of this good do a firm facing this demand curve have to produce to

maximize its revenues?

i. What are the maximum revenues for this firm?

j. Draw the total revenue curve associated with this demand curve.

coffeeprairie-dog291

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 200 Lecture Notes - Lecture 4: Demand Curve, Inferior Good, Substitute Good

ECON 200 Full Course Notes

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