ECON 101 Chapter Notes - Chapter 6: Demand Curve, Midpoint Method, Substitute Good

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Price elasticity of demand- ratio of the percent change in quantity demanded to the percent change in price as we move along the demand curve. Use percentage to obtain value that doesn"t depend on units of good produced. % change in quantity demanded is equal to change in quantity demanded/initial quantity demanded x100. % change in price = change in price/initial price x 100. Typically report abs(price elasticity of demand) since it is commonly accepted that demand curve is downwards sloping (so a rise in price will result in a decrease in quantity demanded, and vice versa) Larger the price elasticity of demand, the more responsive the quantity demanded is to the price (highly elastic) Ineslastic demand- when quantity demanded stays fairly consistent across price fluctuations. Midpoint method- technique for calculating the percent change- calculating changes in a variable compared with the average of the starting and final values.

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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.