MGEA02H3 Lecture Notes - Lecture 7: Negative Number, Inferior Good, Ceteris Paribus

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crimsonraccoon916

25 Oct 2017

School

UTSC

Department

Economics for Management Studies

Course

MGEA02H3

Professor

Jack Parkinson

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MGEA02H3 Full Course Notes

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Mgea02h3 lecture 7 elasticity of demand and supply. Lecture 7 will cover chapter 7 of the microeconomics textbook and the supplement a document to be posted on blackboard. Elasticity is a measure of a variable"s sensitivity to a change in another variable. Elasticity the se(cid:374)siti(cid:448)ity of o(cid:374)e (cid:448)a(cid:396)ia(cid:271)le to a(cid:374)othe(cid:396). It(cid:859)s a (cid:373)easu(cid:396)e of ho(cid:449) responsive the demand or supply is to changes in income or price. In the introduction to microeconomics: a mathematical approach, elasticity refers the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes. Infinitely inelastic demand the exact opposite principle, stating that consumers will buy a fixed quantity of a good regardless of its price. Point elasticity the price elasticity at a particular point on either the demand or supply curve. If allowed only a short time to pass say, one year or less they(cid:859)(cid:396)e a(cid:396)e deali(cid:374)g (cid:449)ith the short run.

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

From the scenario for Katrinaâs Candies, examine the procedure Herb will use to estimate the "demand model" for this product and comment on the expected price elasticity, income elasticity, and cross price elasticity of demand. That is, do you expect demand to be price elastic or inelastic? Will the income elasticity suggest Katrina Candies is a luxury or a necessary good? And, is there likely to be a strong cross price elasticity with the other products that Herb included in his demand model? Explain your answers. What can you determine about consumer demand for a product whose estimated demand elasticities are as follows: Price Elasticity of demand is -0.85 Income Elasticity of demand is 2.5 Cross Price Elasticity of demand with this product and your product is -2 I would like you to think about this simple formula for predicting the change in total revenue when there is a given percentage change in price. Using the example above, if ED (price elasticity of demand) is -.85, then a 10% increase in price will cause the quantity demanded to fall by 8.5%, (-8.5% / 10% = -.85). The Formula for Predicting % Changes in Total Revenue is: %ÎTR = %ÎQ + %ÎP where TR = Total Revenue, Q is Quantity Demanded and P = price. Using this formula, what would be the % Î in TR if ED is -.85 and the %ÎP is 10%?

lilaccattle807

Q3 Elasticities (2p) a. Assume the market demand for wheat may be written as Q = 45 - 2p + 0.3Y + 1pb where Y refers to income and pb refers to the price of barley. Assuming that wheat and barley both sell for $1, and income is $20, calculate the price elasticity, cross price elasticity and income elasticity for wheat. b. Explain why when the demand curve for a good is elastic, a one percent reduction in the price of the good will increase a consumer's expenditure on the good. c. Explain why the price elasticity of demand changes along a linear demand curve. d. Explain whether you would expect the elasticity of supply to be highly elastic or inelastic for fresh cut flowers and why.

MGEA02H3 Lecture Notes - Lecture 7: Negative Number, Inferior Good, Ceteris Paribus

MGEA02H3 Full Course Notes

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