ECON 2010 Chapter Notes - Chapter 5: Midpoint Method, Demand Curve, Negative Number

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3 Jan 2016

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In the event that something like war in the middle east or a new tax passed by congress, the prices of gasoline would go up. This question can be answered using a concept called elasticity. Elasticity is a measure of how much buyers and sellers respond to changes in market conditions. The elasticity of demand is a measure of the size of the change in demand, as opposed to just figuring out that a certain event changes it. 5-1a the price elasticity of demand and its determinants. The price elasticity of demand measure how much the quantity demanded responds 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. Demand is said to be inelastic if the quantity demanded responds only slightly to changes in the price.

Related Questions

The price elasticity of demand measures how much:

a. quantity demanded responds to a change in price

b. quantity demanded responds to a change in income

c. price responds to a change in demand

d. demand responds to a change in supply

yellowbee66

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.

Price elasticity looks at

Select one:

a. The law of demand.

b. How much quantity demanded changes after a change in price.

c. Why the law of demand is untrue.

d. The degree to which price changes with a change in quantity demanded.

purplekoala954

ECON 2010 Chapter Notes - Chapter 5: Midpoint Method, Demand Curve, Negative Number

ECON 2010 Full Course Notes

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