Econ Chapter 6

Chapter six. Economics.

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THE PRICE ELASTICITY OF DEMAND COEFFICIENT MEASURES....
RESPONSIVENESS TO PRICE CHANGES.
THE BASIC FORMULA FOR THE PRICE ELASTICITY OF DEMAND COEFFICIENT IS
PERCENTAGE CHANGE IN QUANTITY DEMANDED/PERCENTAGE CHANGE IN PRICE.
IF THE PRICE ELASTICITY OF DEMAND FOR A PRODUCT IS 2.5, THEN A PRICE CUT FROM $2.00 TO $1.80 WILL
INCREASE THE QUANTITY DEMANDED BY ABOUT 25 PERCENT.
WHICH OF THE FOLLOWING IS NOT CHARACTERISTIC OF THE DEMAND FOR A COMMODITY THAT IS ELASTIC?
THE ELASTICITY COEFFICIENT IS LESS THAN ONE.
IF THE DEMAND FOR PRODUCT X IS INELASTIC, A 4 PERCENT INCREASE IN THE PRICE OF X WILL
DECREASE THE QUANTITY OF X DEMANDED BY LESS THAN 4 PERCENT.
A PERFECTLY INELASTIC DEMAND SCHEDULE
CAN BE REPRESENTED BY A LINE PARALLEL TO THE VERTICAL AXIS.
THE PRICE ELASTICITY OF DEMAND OF A STRAIGHT-LINE DEMAND CURVE IS
ELASTIC IN HIGH-PRICE RANGES AND INELASTIC ON LOW-PRICE RANGES.
A LEFTWARD SHIFT IN THE SUPPLY CURVE OF PRODUCT X WILL INCREASE EQUILIBRIUM PRICE TO A GREATER EXTENT THE
MORE INELASTIC THE DEMAND FOR THE PRODUCT
IF THE DEMAND FOR BACON IS RELATIVELY ELASTIC, A 10 PERCENT DECLINE IN THE PRICE OF BACON WILL
INCREASE THE AMOUNT DEMANDED BY MORE THAN 10 PERCENT.
THE PRICE ELASTICITY OF DEMAND IS:
NEGATIVE, BUT THE MINUS SIGN IS IGNORED.
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:
DECREASE BY APPROXIMATELY 12 PERCENT.
IF A DEMAND FOR A PRODUCT IS ELASTIC, THE VALUE OF THE PRICE ELASTICITY COEFFICIENT IS:
GREATER THAN ONE
IF THE PRICE OF HAND CALCULATORS FALLS FROM $10 TO $9 AND, AS A RESULT, THE QUANTITY DEMANDED INCREASES FROM 100 TO 125, THEN:
DEMAND IS ELASTIC.
MOVING UPWARD ON A DOWNWARD-SLOPING STRAIGHT-LINE DEMAND CURVE, WE FIND THAT PRICE ELASTICITY:
INCREASES CONTINUOUSLY.
IF THE PRICE ELASTICITY OF DEMAND FOR GASOLINE IS 0.20:
A 10 PERCENT RISE IN THE PRICE OF GASOLINE WILL DECREASE THE AMOUNT PURCHASED BY 2 PERCENT.