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THE PRICE ELASTICITY OF DEMAND COEFFICIENT MEASURES.... |
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RESPONSIVENESS TO PRICE CHANGES. |
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THE BASIC FORMULA FOR THE PRICE ELASTICITY OF DEMAND COEFFICIENT IS |
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PERCENTAGE CHANGE IN QUANTITY DEMANDED/PERCENTAGE CHANGE IN PRICE. |
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IF THE PRICE ELASTICITY OF DEMAND FOR A PRODUCT IS 2.5, THEN A PRICE CUT FROM $2.00 TO $1.80 WILL |
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INCREASE THE QUANTITY DEMANDED BY ABOUT 25 PERCENT. |
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WHICH OF THE FOLLOWING IS NOT CHARACTERISTIC OF THE DEMAND FOR A COMMODITY THAT IS ELASTIC? |
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THE ELASTICITY COEFFICIENT IS LESS THAN ONE. |
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IF THE DEMAND FOR PRODUCT X IS INELASTIC, A 4 PERCENT INCREASE IN THE PRICE OF X WILL |
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DECREASE THE QUANTITY OF X DEMANDED BY LESS THAN 4 PERCENT. |
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A PERFECTLY INELASTIC DEMAND SCHEDULE |
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CAN BE REPRESENTED BY A LINE PARALLEL TO THE VERTICAL AXIS. |
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THE PRICE ELASTICITY OF DEMAND OF A STRAIGHT-LINE DEMAND CURVE IS |
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ELASTIC IN HIGH-PRICE RANGES AND INELASTIC ON LOW-PRICE RANGES. |
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A LEFTWARD SHIFT IN THE SUPPLY CURVE OF PRODUCT X WILL INCREASE EQUILIBRIUM PRICE TO A GREATER EXTENT THE |
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MORE INELASTIC THE DEMAND FOR THE PRODUCT |
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IF THE DEMAND FOR BACON IS RELATIVELY ELASTIC, A 10 PERCENT DECLINE IN THE PRICE OF BACON WILL |
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INCREASE THE AMOUNT DEMANDED BY MORE THAN 10 PERCENT. |
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THE PRICE ELASTICITY OF DEMAND IS: |
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NEGATIVE, BUT THE MINUS SIGN IS IGNORED. |
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THE PRICE ELASTICITY OF DEMAND FOR BEEF IS ABOUT 0.60. OTHER THINGS
EQUAL, THIS MEANS THAT A 20 PERCENT INCREASE IN THE PRICE OF BEEF WILL
CAUSE THE QUANTITY OF BEEF DEMANDED TO: |
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DECREASE BY APPROXIMATELY 12 PERCENT. |
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IF A DEMAND FOR A PRODUCT IS ELASTIC, THE VALUE OF THE PRICE ELASTICITY COEFFICIENT IS: |
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GREATER THAN ONE |
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IF THE PRICE OF HAND CALCULATORS FALLS FROM $10 TO $9 AND, AS A RESULT, THE QUANTITY DEMANDED INCREASES FROM 100 TO 125, THEN: |
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DEMAND IS ELASTIC. |
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MOVING UPWARD ON A DOWNWARD-SLOPING STRAIGHT-LINE DEMAND CURVE, WE FIND THAT PRICE ELASTICITY: |
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INCREASES CONTINUOUSLY. |
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IF THE PRICE ELASTICITY OF DEMAND FOR GASOLINE IS 0.20: |
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A 10 PERCENT RISE IN THE PRICE OF GASOLINE WILL DECREASE THE AMOUNT PURCHASED BY 2 PERCENT. |
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WHEN THE PERCENTAGE CHANGE IN PRICE IS GREATER THAN THE RESULTING PERCENTAGE CHANGE IN QUANTITY DEMANDED |
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AN INCREASE IN PRICE WILL INCREASE TOTAL REVENUE. |
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IN WHICH OF THE FOLLOWING INSTANCES WILL TOTAL REVENUE DECLINE? |
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PRICE RISES AND DEMAND IS ELASTIC |
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IF A PRICE REDUCTION REDUCES A FIRM'S TOTAL REVENUE: |
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THE DEMAND FOR THE PRODUCT IS INELASTIC IN THIS PRICE RANGE. |
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THE DEMANDS FOR SUCH PRODUCTS AS SALT, BREAD, AND ELECTRICITY TEND TO BE |
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RELATIVELY PRICE INELASTIC. |
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THE PRICE ELASTICITY OF SUPPLY MEASURES HOW |
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RESPONSIVE THE QUANTITY SUPPLIED OF X IS TO CHANGES IN THE PRICE OF X. |
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THE MAIN DETERMINANT OF ELASTICITY OF SUPPLY IS THE: |
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AMOUNT OF TIME THE PRODUCER HAS TO ADJUST INPUTS IN RESPONSE TO A PRICE CHANGE. |
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SUPPOSE THE SUPPLY OF PRODUCT X IS PERFECTLY INELASTIC. IF THERE IS AN
INCREASE IN THE DEMAND FOR THIS PRODUCT, EQUILIBRIUM PRICE: |
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WILL INCREASE BUT EQUILIBRIUM QUANTITY WILL BE UNCHANGED. |
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THE SUPPLY OF KNOWN MONET PAINTINGS IS |
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PERFECTLY INELASTIC |
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IF THE INCOME ELASTICITY OF DEMAND FOR LARD IS
3.00, THIS MEANS THAT |
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LARD IS AN INFERIOR GOOD. |
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THE FORMULA FOR CROSS ELASTICITY OF DEMAND IS PERCENTAGE CHANGE IN: |
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QUANTITY DEMANDED OF X/PERCENTAGE CHANGE IN PRICE OF Y. |
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THE LARGER THE POSITIVE CROSS ELASTICITY COEFFICIENT OF DEMAND BETWEEN PRODUCTS X AND Y, THE: |
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GREATER THEIR SUBSTITUTABILITY |
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WE WOULD EXPECT THE CROSS ELASTICITY OF DEMAND BETWEEN DRESS SHIRTS AND TIES TO BE |
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NEGATIVE, INDICATING COMPLEMENTARY GOODS. |
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THE DIFFERENCE BETWEEN THE MAXIMUM PRICES CONSUMERS ARE WILLING TO PAY FOR A PRODUCT AND THE LOWER EQUILIBRIUM PRICE IS |
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CONSUMER SURPLUS: |
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