Economics 1021A/B Chapter Notes - Chapter 4: Demand Curve, Economic Equilibrium, Inferior Good

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When supply decreases, the equilibrium price rises and the equilibrium quantity decreases. Price elasticity of demand: units-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same. Price ed: percentage change in quantity demanded / percentage change in price. To calculate price ed, we express the change in price as a percentage of the average price and the change in qd as a percentage of the average quantity. By using the average price and average quantity we calculate the elasticity at a point on the demand curve midway between the original point and the new point. Average price quantity: gives the most precise measurement of elasticity at the midpoint between the original price and the new price. By using percentages of the average price and average quantity, we get the same value for the elasticity regardless of whether the price falls or rises.

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

QUESTION 1

The demand for oranges increases while the supply decreases. The equilibrium price of oranges ________, and the equilibrium quantity ________.

		falls; increases
		falls; perhaps changes but we can't say if it increases, decreases, or stays the same
		rises; decreases
		rises; perhaps changes but we can't say if it increases, decreases, or stays the same

1 points

QUESTION 2

Assume a competitive market is in equilibrium. There is an increase in demand, but no change in supply. As a result the equilibrium price ________, and the equilibrium quantity is ________.

		rises; increases
		falls; decreases
		falls; does not change
		rises; does not change

1 points

QUESTION 3

Bagels and cream cheese are complementary goods. Suppose that the price for flour, which is used to produce bagels, increases. The equilibrium price of cream cheese ________ and the equilibrium quantity of cream cheese ________.

		does not change; does not change
		rises; increases
		falls; decreases
		rises; decreases

1 points

QUESTION 4

If consumers buy a large number of plug-in electric cars, the equilibrium price of electricity will ________ and the equilibrium quantity of electricity will ________.

		rise; increase
		rise; decrease
		fall; increase
		fall; decrease

1 points

QUESTION 5

Which of the following shifts the supply curve for oranges?

		an increase in income for all orange consumers if oranges are a normal good
		disastrous weather that destroys about half of this year's orange crop
		an increase in the price of bananas, a substitute in consumption for oranges
		a newly discovered increase in the nutritional value of oranges

1 points

QUESTION 6

Which of the following shifts the supply curve of rutabagas rightward? (A rutabaga is a potato-like vegetable.)

		normal goods in production.
		an exceptionally cold summer that killed much of the rutabaga crop.
		a fall in the price of fertilizer used to grow rutabagas.
		an increase in the price of a rutabaga

1 points

QUESTION 7

Suppose over the next several years the productivity of firms producing electric cars improves dramatically. The advance in productivity leads to

		an increase in the supply electric cars so that the supply curve shifts rightward.
		an increase in the supply of electric cars so that the supply curve shifts leftward.
		a decrease in the supply of electric cars so that the supply curve shifts rightward.
		a decrease in the supply of electric cars so that the supply curve shifts leftward.

1 points

QUESTION 8

Hot dogs and hot dog buns are complements. If the price of a hot dog falls, then

		the demand for hot dogs will increase.
		the demand for hot dog buns will decrease.
		the quantity demanded of hotdogs will decrease.
		the demand for hot dog buns will increase.

1 points

QUESTION 9

Demand curves slope ________ because as the price increases and other things remain the same, the quantity demanded ________.

		upward; increases
		downward; decreases
		upward; decreases
		downward; increases

1 points

QUESTION 10

Water bottlers announce that next month the price of bottled water will rise by 25 percent. Which of the following occurs immediately?

		The quantity of bottled water demanded increases.
		The demand for bottled water increases.
		The quantity of bottled water demanded decreases.
		The demand for bottled water decreases.

1 points

QUESTION 11

If the price of carrots is below the equilibrium price, the

		quantity supplied of carrots exceeds the quantity demanded and a shortage exists.
		quantity demanded of carrots exceeds the quantity supplied and a shortage exists.
		quantity supplied of carrots exceeds the quantity demanded and a surplus exists.
		quantity demanded of carrots exceeds the quantity supplied and a surplus exists.

1 points

QUESTION 12

Which of the following is true regarding demand?
i. Demand is the relationship between quantity demanded and the price of a good when all other influences on buying plans remain the same.
ii. Demand refers to one quantity at one time.
iii. "Demand" and " quantity demanded" are the same thing.

		both i and ii
		i only.
		ii only.
		iii only.

1 points

QUESTION 13

Suppose the current price of a pound of steak is $6 per pound and the equilibrium price is $9 per pound. What takes place?

		There is a shortage, so the price rises and quantity demanded decreases.
		There is a shortage, so the price rises and quantity demanded increases.
		There is a shortage, so the price falls and quantity demanded increases.
		There is a surplus, so the price falls and quantity demanded increases.

1 points

QUESTION 14

The number of corn producers increases, so the supply of corn ________ and the supply curve of corn ________.

		decreases; shifts leftward
		decrease; shifts rightward
		increases; shifts rightward
		increases; shifts leftward

1 points

QUESTION 15

Market equilibrium

i. can never occur because there are always people who want a good but cannot afford it.

ii. occurs at the intersection of the supply and demand curves.

iii. is the point where the price equals the quantity.

		iii only
		ii and iii
		ii only
		i only

1 points

QUESTION 16

Milk can be used to produce cheese or butter. If the price of a pound of butter rises, what happens to the supply of cheese?

		The supply of cheese stays the same and there is a decrease in the quantity supplied of cheese.
		The supply of cheese decreases.
		The supply of cheese stays the same and there is no change in the quantity supplied of cheese.
		The supply of cheese increases.

1 points

QUESTION 17

Consumers regard Dell computers and Apple computers as substitutes. If the price of a Dell computer decreases, the

		demand for Dell computers decreases.
		demand for Apple computers increases.
		demand for Apple computers decreases.
		demand for Dell computers increases.

1 points

QUESTION 18

Suppose the current price of a pound of steak is $12 per pound and the equilibrium price is $9 per pound. In this case, there is a

		surplus, so the price rises and quantity demanded increases.
		shortage, so the price rises and quantity demanded decreases.
		surplus, so the price falls and quantity demanded increases.
		shortage, so the price falls and quantity demanded increases.

1 points

QUESTION 19

Plywood is used in the construction of houses. If the price of plywood rises, what happens to the supply of houses?

		The supply increases so that the supply curve shifts rightward.
		The quantity supplied increases but there is no shift in the supply curve.
		The supply decreases so that the supply curve shifts leftward.
		The quantity supplied decreases but there is no shift in the supply curve.

1 points

QUESTION 20

In stores, it is common to find seasonal products marked down when the season ends. What explains this behavior?

		The store is trying to increase its customers' demand for the product.
		The law of demand is being used to increase the quantity demanded.
		The store manager must be trying to drive away customers by selling low quality products.
		The store is trying to increase its consumer's incomes by increasing their purchasing power.

1 points

QUESTION 21

Suppose that the price of flour used to produce bagels increases. Hence the equilibrium price of a bagel ________ and the equilibrium quantity ________.

		rises; increases
		rises; decreases
		falls; increases
		falls; decreases

1 points

QUESTION 22

If both the supply and demand curves shift simultaneously, we can always predict what will happen to

		either the price or the quantity, but not both.
		only the quantity.
		only the price.
		both the price and the quantity.

1 points

QUESTION 23

If income increases and the demand for bus rides decreases,

		bus rides are a substitute good.
		consumers are behaving irrationally.
		bus rides are an inferior good.
		bus rides are a normal good.

1 points

QUESTION 24

A surplus of cardboard boxes means that

		at the current price of a cardboard box, the quantity demanded equals the quantity supplied and the price will fall to restore the equilibrium..
		the current price of a cardboard box is less than the equilibrium price.
		at the current price of a cardboard box, the quantity demanded exceeds the quantity supplied.
		at the current price of a cardboard box, the quantity demanded is less than the quantity supplied.

1 points

QUESTION 25

If a freeze destroys oranges before they are harvested, the equilibrium price of an orange ________ and the equilibrium quantity ________.

		rises; increases
		rises; decreases
		falls; increases
		falls; decreases

1 points

turquoisedeer344

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.

Economics 1021A/B Chapter Notes - Chapter 4: Demand Curve, Economic Equilibrium, Inferior Good

ECON 1021A/B Full Course Notes

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