ECON 1000 Study Guide - Final Guide: Normal Good, Inferior Good

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ECON 1000 Full Course Notes

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Econ1000 lecture 6 chapter 4: elasticity price elasticity of demand. Calculating price elasticity of demand (% change in quantity demanded / % change in price) x 100 = ____% Demand can be inelastic, unit elastic, elastic, and can range from 0 to infinity. Unit (unitary) elastic: e = 1 elastic: e > 1. Revenue change: price change and/or quantity change if: E > 1 (elastic), then revenue change > 0, when price change < 0. E = 1 (unit elastic), then revenue change = 0, when price change < 0 or price change > E < 1 (inelastic), then revenue change < 0 when price change < 0. A method of estimating the price elasticity of demand by observing the change in total revenue that results from a price change (when all other influences on the quantity sold remain the same). The factors that influence the elasticity of demand. The elasticity of demand for a good depends on:

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1. The concept of price elasticity of demand measures:

a. the slope of the demand curve.

b. the number of buyers in a market.

c. the extent to which the demand curve shifts as the result of a price decline.

d. the sensitiveness of quantities demanded to price changes.

2. When the percentage change in price is less than the resulting percentage change in quantity demanded:

a. demand is elastic.

b. demand is inelastic.

c. demand is unit elastic.

d. none of the above.

3. The elasticity of demand:

a. will be the same at each price-quantity combination on a stable demand curve.

b. tends to be elastic in high-price ranges and inelastic in low-price ranges.

c. tends to be inelastic in high-price ranges and elastic in low-price ranges.

d. is infinitely large for a perfectly inelastic demand curve.

4. Suppose that as the price of Y falls from $2.00 to $1.80 the quantity of Y demanded increases from 110 to 121. It can be concluded that the price elasticity of demand is: _______.

5. Total revenue rises as the price of a good increases if price elasticity of demand is:

a. unitary elastic

b. perfectly inelastic.

6. The demand for such products as salt, bread, and electricity tend to be:

a. relatively price elastic.

b. relatively price inelastic.

c. of unit price elasticity.

d. perfectly price elastic.

coffeeelephant81

In this question, we will determine the price elasticity of demand using both the coefficient of elasticity and the total revenue test.

Use the demand schedule in the table below to answer the following questions.

Quantity Demand	Price
10	200
20	150
30	100
40	50
50	25

a) Calculate the total revenue for each row in the demand schedule. indicate whether total revenue increases or decreases between each row int eh demand schedule. use the total revenue test to classify each price/quantity change as elastic, inelastic, or uni-elastic.

b) calculate the own price-elasticity coefficient for each row in the demand schedule. use the coefficients you calculate to classify each price/quantity change as elastic, inelastic, unit elastic.

in your answer it will be useful to recall that the midpoint formula for percentage change is:

%change midpoint = (final - initial) / ((finial + initial)/2)

and own price elasticity can be calculated by using the formula

Ed= (percentage change in quantity demand of product x) / (percentage change the in the price of product x)

fuchsiacoyote513

1. If a 3 percent increase in price leads to a 5 percent increase in quantity supplied, then

a. Supply is unit elastic

b. Demand is inelastic.

c. Demand is elastic.

d. Supply is elastic.

e. Supply is inelastic.

2. Moving along a demand curve, the quantity demanded decreases 8 percent when price increases 10 percent.

The price elasticity of demand is calculated to be ________.

Given the price elasticity of demand calculated in part a, demand is ________ (elastic, inelastic or unitary elastic) along this portion of the demand curve.

3. Fill in the blanks:

When demand is elastic, the _______ effect dominates the _______ effect.

When demand is inelastic, the _______ effect dominates the _______ effect.

4. Use the following coordinates to answer the following questions.

(2400, $0), (1800, $3), (1000, $7), and (0, $12)

a. Find the arc price elasticity of demand over the price range from $3 to $7. Interpret the value of price elasticity.

ECON 1000 Study Guide - Final Guide: Normal Good, Inferior Good

ECON 1000 Full Course Notes

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