ECON 102 Lecture 12: econ 12

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7 Aug 2017

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A measure of responsiveness of one variable to a change in another: prices elasticity of demand (ped, cross price elasticity of demand (cped, income elasticity of demand (ied, price elasticity of supply (pes) Elastic: considered elastic (cid:449)he(cid:374) q. d is (cid:448)ery respo(cid:374)si(cid:448)e relati(cid:448)e to a i(cid:374) p, % q. d > % p, |elasticity| > 1. Inelastic: co(cid:374)sidered irrelati(cid:448)e (cid:449)he(cid:374) q. d is (cid:374)ot (cid:448)ery respo(cid:374)si(cid:448)e to a i(cid:374) p, % q. d < % p, |elasticity| < 1. Unit elastic: considered unit elastic when q. d is equally responsi(cid:448)e to a i(cid:374) p, % q. d = % p, |elasticity| = 1. A (cid:373)easure of ho(cid:449) respo(cid:374)si(cid:448)e q. d is to a i(cid:374) p. Cannot rely on slope as the elasticity, must use % . Slope is dependent on unit of measurement; using % eradicates this issue (cid:4666)(cid:3121) (cid:3117)(cid:3116)(cid:3117)(cid:3116)(cid:4667) -2 (cid:4666)(cid:3120)(cid:3116)(cid:3116) (cid:3118)(cid:3116)(cid:3116) Ped = (cid:4666)(cid:3120)(cid:3116)(cid:3116) (cid:3118)(cid:3116)(cid:3116) (cid:4667) (cid:4667) (cid:3118)(cid:3116)(cid:3116) (cid:3118)(cid:3116)(cid:3116) (cid:4666)(cid:3121)(cid:3116)(cid:3116) (cid:3117)(cid:3116)(cid:3116)(cid:3116) (cid:4667) (cid:3117)(cid:3116) A (cid:1005)% i(cid:374) p (cid:449)ill cause a (cid:1006)% i(cid:374) q. d.

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

1. If a 3 percent increase in price leads to a 5 percent increase in quantity supplied, then

a. Supply is unit elastic

b. Demand is inelastic.

c. Demand is elastic.

d. Supply is elastic.

e. Supply is inelastic.

2. Moving along a demand curve, the quantity demanded decreases 8 percent when price increases 10 percent.

The price elasticity of demand is calculated to be ________.

Given the price elasticity of demand calculated in part a, demand is ________ (elastic, inelastic or unitary elastic) along this portion of the demand curve.

3. Fill in the blanks:

When demand is elastic, the _______ effect dominates the _______ effect.

When demand is inelastic, the _______ effect dominates the _______ effect.

4. Use the following coordinates to answer the following questions.

(2400, $0), (1800, $3), (1000, $7), and (0, $12)

a. Find the arc price elasticity of demand over the price range from $3 to $7. Interpret the value of price elasticity.

5. The demand curve for a product is given by Qdx = 1,000 - 2Px + .02Pz where Pz = $400. (Hint: If you're not comfortable with the calculus alternatives, compute Q at the given prices, then again with a 1% increase in price. Then figure percentage change in Q over the percentage change in P, %Q/%P).

a. What is the own-price elasticity of demand when Px = $154? Is the demand elastic or inelastic? What would happen to the firm's revenue if it decided to charge a price below $154?

b. What is the own-price elasticity of demand when Px = $354? Is the demand elastic or inelastic? What would happen to the firm's revenue if it decided to charge a price below $354?

c. What is the cross-price elasticity of demand between good X and good Z when Px = $154? Are good X and good Z substitutes are complements?

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ECON 102 Lecture 12: econ 12

ECON 102 Full Course Notes

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