ECON-1010 Chapter Notes - Chapter 5: Maximum Wage, Price Ceiling, Economic Equilibrium

12 views3 pages

brownmule668

4 Feb 2020

School

Vanderbilt University

Department

Economics

Course

ECON-1010

Professor

Buckles Stephen

For unlimited access to Textbook Notes, a Class+ subscription is required.

ECON-1010 Full Course Notes

Verified Note

3 documents

Document Summary

Chapter objectives: understand the meaning of elasticity when applied to demand, explain what it is about some goods that make demand elastic or inelastic, explain the consequences on equilibrium prices and quantities and on economic efficiency of price. Specifically, if the percentage change in quantity demanded divided by the percentage change in price is greater than one, we define demand as being elastic. Quantity demanded changes a great deal when price changes. Inelastic demand--the quantity demanded is not very sensitive to changes in prices. Specifically, if the percentage change in quantity demanded divided by the percentage change in price is less than one, we define demand as being inelastic. Therefore, the greater the number of substitutes, the greater the elasticity is likely to be: whether or not a good is necessary--we will be less sensitive to changes in prices of necessary goods--inelastic.

Related Questions

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.

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

*Please provide the answer but also explain what is inelastic, elastic,unitary elastic

*Please explain elasticity of demand values

*Please explain what is an inferior good, how to obtain the answer.

1) If the price of gasoline increases 10% and quantity demanded decreases by 5%, then the demand curve for gasoline is:

A) inelastic.

B) elastic.

C) unitary elastic.

D) a perfect substitutable good.

2) If a good has an elasticity of demand of 21, then we say the good is:

A) highly inelastic.

B) unitary elastic. C) not elastic.

D) highly elastic.

3) For inferior goods, when an individual's income decreases, quantity demanded for these goods increases.

A) True

B) False

ECON-1010 Chapter Notes - Chapter 5: Maximum Wage, Price Ceiling, Economic Equilibrium

ECON-1010 Full Course Notes

Document Summary

Get access

Related Documents

ECON-1010 Chapter Notes - Chapter 4: Economic Equilibrium, Complementary Good

ECON-1010 Chapter Notes - Chapter 4: Marginal Cost, Economic Equilibrium, Root Mean Square

ECON-1010 Lecture Notes - Lecture 3: Economic Equilibrium, Allocative Efficiency, Normal Good

Related Questions