Eco 102 H Review (Chapter 5: Elasticity And Its Application)

If the elasticity is exactly 1, it means that a change in price will result in an equal percentage change in quantity demanded. This indicates that demand is responsive to price changes, as the quantity moves the same amount proportionately as the price. Therefore, demand is said to have unit elasticity.

Elasticity refers to the responsiveness of buyers and sellers to changes in market conditions. It measures the magnitude of this response, indicating how much buyers and sellers adjust their behavior in response to changes in factors such as price, income, or demand. Therefore, the statement that elasticity measures the magnitude of how much buyers and sellers respond to changes in market conditions is true.

True, because it is easier to for consumers to switch from that good to others.

Normal goods are those for which demand increases as income increases. Therefore, they have positive income elasticities. On the other hand, inferior goods are those for which demand decreases as income increases. Hence, they have negative income elasticities.

The statement is true because the midpoint method is a commonly used formula to calculate the price elasticity of supply. This method takes into account the percentage change in quantity supplied and the percentage change in price, which allows for a more accurate measurement of elasticity. By using the midpoint method, economists can determine how responsive the quantity supplied is to changes in price, helping to understand the elasticity of supply in a given market.

elastic: greater than 1; inelastic: less than 1

Large income elasticities because consumers feel that they can do without these goods altogether if their income are too low.

Necessities: inelastic demand; Luxuries: elastic demand

When a good has an elastic demand, it means that the quantity demanded is highly responsive to changes in price. Therefore, if the price of the good increases, the quantity demanded will decrease significantly, resulting in a decrease in total revenue. On the other hand, when a good has an inelastic demand, it means that the quantity demanded is not very responsive to changes in price. In this case, if the price of the good increases, the quantity demanded will decrease only slightly, leading to an increase in total revenue. Therefore, the statement is true.

The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It indicates how much consumers are willing to change their quantity demanded in response to a change in price. A higher price elasticity of demand suggests that consumers are more willing to buy less of the good as its price increases, not decreases. Therefore, the statement is false.

It's hard to change the supply of a beach resort even if the demand rapidly changes, but in the long run it becomes more elastic.

It increases because addicts will tend to succumb to crimes such as stealing to keep up with the prices of the drugs. Education, on the other hand, decreases drug-related crime.

This is true because the slope is the ratio of changes in two variables, whereas the elasticity is the ratio of percentage changes in the two variables.

This statement suggests that what may benefit farmers individually may not always benefit society as a whole. While certain agricultural practices or policies may be advantageous for farmers in terms of their profits or yields, they may have negative impacts on the environment, public health, or other aspects of society. Therefore, it is possible for something to be beneficial for farmers but not for society as a whole.

The statement suggests that the importance of understanding what elasticity represents outweighs the significance of knowing the specific calculations used to determine it. This implies that comprehending the concept and its implications is more crucial than being able to perform the calculations accurately.

True, because the price elasticity of demand measures how much quantity demand responds to changes in price.

The statement is true because the flatter the demand curve, the more responsive consumers are to changes in price. This means that even a small change in price will result in a larger change in quantity demanded. On the other hand, a steeper demand curve indicates that consumers are less responsive to price changes, resulting in a smaller change in quantity demanded for a given change in price. Therefore, a flatter demand curve indicates a greater price elasticity of demand, and vice versa.

True, because consumers choose to buy some of these goods even when their income are low.

As the elasticity of supply increases, the responsiveness of quantity supplied to changes in price also increases. This means that a small change in price will result in a relatively larger change in quantity supplied. In other words, the supply curve becomes flatter as elasticity rises because suppliers are more willing and able to adjust their quantity supplied in response to price changes. Therefore, the given statement is true.

True, because it is easier to find close substitutes for narrowly defined goods.

it does depend on the price elasticity of the demand.

...more elastic.

inelastic.

...increase the quantity supplied

True, but on the preference of the buyer.

Sir's lesson

In the short run, a company can easily increase prices as it requires minimal adjustments to its existing operations. It can simply raise prices to increase revenue without making significant changes to its production or supply chain. However, in the long run, increasing prices may require more complex adjustments such as renegotiating contracts, investing in new technology, or finding alternative suppliers. Therefore, it is generally easier for a company to raise prices in the short run compared to the long run.

...greater responsiveness

The given statement is not part of the general rules for demand elasticity because when demand is unit elastic, total revenue remains constant when the price changes.

substitutes: positive
complements: negative

elastic: points with high price and low quantity
inelastic: points with low price and high quantity

Total revenue

The demand elasticity of a product measures the responsiveness of the quantity demanded to a change in price. In this case, the price of the product increased from $4 to $6, causing the quantity to decrease from 120 to 80. The midpoint method calculates the percentage change in quantity demanded and the percentage change in price. By using the formula (change in quantity/average quantity) divided by (change in price/average price), we can determine the demand elasticity. In this case, the percentage change in quantity is -33.33% and the percentage change in price is 50%. Dividing these two values, we get a demand elasticity of 1, indicating that the product is unit elastic.

Fiscal Stimulus (Sir's lesson)