question
What are some things that affect Q demanded
answer
Price
Price of substittes
Price of substittes
question
Q = 117 -6.6P + 1.66Ps -3.3Pr + 0.00661I
what does it mean that Q and Ps are both posititve
what does it mean that Q and Ps are both posititve
answer
they are directly related sbstitutes
question
Q = 117 -6.6P + 1.66Ps -3.3Pr + 0.00661I
what does it mean that Q is positive and Pr is negative
what does it mean that Q is positive and Pr is negative
answer
they are inversly related or complimets
question
Q = 117 -6.6P + 1.66Ps -3.3Pr + 0.00661I
what do the coefficents mean?
what do the coefficents mean?
answer
thats the weight of the item
question
Q = 117 -6.6P + 1.66Ps -3.3Pr + 0.00661I
what does the positive I mean?
what does the positive I mean?
answer
That its a normal good and as your income increases then the more you will want to buy
question
Q = 117 -6.6P + 1.66Ps -3.3Pr + 0.00661I
what would a negative I mean?
what would a negative I mean?
answer
that its an inferior good
question
Q = 117 -6.6P + 1.66Ps -3.3Pr + 0.00661I
why is P negative?
why is P negative?
answer
because as price decreases the Q decreases. it always has to be negative
question
two words associated with elasticity
answer
sensitivity substitutes
question
Price Elasticity of Demand 3
answer
-Measures the responsiveness of quantity demanded to changes in price• -Often referred to as elasticity of demand•
-Helps firms determine the effect of price changes on total revenue
-Helps firms determine the effect of price changes on total revenue
question
elasticy formula
answer
- ( percent change in quantity / percent change in price)
question
on a number line
infintity---(-1)---0----1----infinity
where is inelastic?
infintity---(-1)---0----1----infinity
where is inelastic?
answer
-1 to 1 that means theres not alot of substittes
question
where does inelasticity fall on a nmber line?
answer
0 to -1
question
how does total rev and price move in relation to elastic
answer
• If demand is elastic (>1), price and total revenue move in opposite directions• If P↑ then TR↓• If P↓ then TR↑
question
if demand is inelastic how does price and total rev move
answer
If demand is inelastic (<1), price and total revenue move together• If P↑ then TR↑• If P↓ then TR↓
question
arc price elasticity forumal
answer
negative (change in Q/ ave of Q. DIVIDED BY change in P over ave P
question
arc price elasticity formula simplified
answer
( negative) Change in Q/ Q1+Q2 DIVIDED BY P/ P1+P2
question
Determinants of Price Elasticity 3
answer
Availability of substitutes
-Size of good in consumer budget
-Time period for consumer adjustment
-Size of good in consumer budget
-Time period for consumer adjustment
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cross price elasticity for sbstitutes
answer
For substitutes, ηXY > 0• If the price of Pepsi rises, the demand for Coke rises
question
cross price elassticity for compliments
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or complements, ηXY < 0• If the price of peanut butter rises, the demand for jelly falls
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elasticity and income
answer
Normal goods - demand rises as income increases (>0)• Inferior goods - demand falls as income increases (<0)
question
total rev formula
answer
P X Q
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Network Effects for elastcity
answer
• Demand for a good increases as the number of users of the good increases
question
• What product attributes are important to consumers?
answer
- price- product design- packaging- promotion
question
If the income elasticity for lobster is 0.4, a 40% increase in income will lead to a:
answer
16% increase in demand for lobster
.4=x/.4
%change QD/%change income
.4=x/.4
%change QD/%change income
question
what does a negative cross price elasticity mean
answer
that the goods are compliments
question
An income elasticity less than zero tells us that the good is:
answer
An inferior good
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An income elasticity is positive tells us that the good is:
answer
subsitute and normal
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An income elasticity is negative tells us that the good is:
answer
compliment and inferiro
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The elasticity that measures the responsiveness of consumer demand to changes in income is the:
answer
Income elasticity
question
If the cross-price elasticity between ketchup and hamburgers is -1.2, a 4% increase in the price of ketchup will lead to a 4.8%:
answer
drop in quantity demanded of hamburgers
question
If the cross-price elasticity between good A & B is negative, we know the goods are:
answer
compliments
question
Lemonade, a good with many close substitutes, should have an own-price elasticity that is:
answer
Relatively elastic
question
Demand is more inelastic in the short-term because consumers:
answer
Have no time to find available substitutes
question
Which of the following factors would not affect the own-price elasticity of a good?
answer
Price of an input
question
If the absolute value of the own-price elasticity of steak is 0.4, a decrease in price will lead to:
answer
A reduction in total revenue
question
The demand curve for a good is horizontal when it is:
answer
A perfectly elastic good
question
The quantity consumed of a good is relatively unresponsive to changes in price whenever demand is:
answer
Inelastic
question
If apples have an own-price elasticity of -1.2 we know the demand is:
answer
elastic
question
As we move down along a linear demand curve, the price elasticity of demand becomes more
answer
Inelastic
question
Assume that the price elasticity of demand is -2 for a certain firm's product. If the firm raises price, the firm's managers can expect total revenue to:
answer
Decrease
question
economies of scale exist whenever loong-run average costs
answer
decrease as output increase
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when ther are economies of scope between two products which are seperatly produced by two firms merging into a single firm
answer
accomplish a reduction in costs
question
when aVC is rising ACT
answer
might be rising or falling
question
when the marginal cost curve is below and average cost curve average cost
answer
...
question
when AVC is falling ATC
answer
ATc is calling
question
ATC 100 MC 80 AVC 90
answer
section one ATC and AC are falling
question
marginal cost is like a
answer
magnet
question
when output rises AFC
answer
decreases
question
afc is the difference between
answer
atc and avc
question
when marginal cost curve is below the average cost curve, average cost is
answer
declining with outoput
question
question 10
answer
33.33
question
q12
answer
...
question
in perfect competition is a firm a price maker or price taker
answer
price taker
question
what shape does perfect competition graph look like for a firm?
answer
an X
question
in perfect competition is ATC above or below AVC for a firm
answer
aboce
question
in perfect competition is ATC and AVC above or below price?
answer
below
question
whats the decision rule for profit maximizing quantity?
answer
MC=MR
question
how do you find your profit maximizing cost?
answer
Follow your profit maximizing quanity until you hit your ATC thats the cost
question
in perfect competition MR= ? and ?
answer
P and D
question
economic profit is ? - ?
answer
...
question
to show a loss on a perfect competition you shift all curves ?
answer
up
question
economic profit = ?
answer
accounting profit - opportunity cost
question
in perfect competition MC= ?
answer
ATC P D and MR
question
monopolistic competition summed up in two words
answer
product differentation so basically instead of having a product like everyone else its specialized
question
in monoploistic competition what does D curve and MR curve look like
answer
two downwards sloaping lines
question
cost = intersection of what and what
answer
Quantity and ATC
question
Price = intersection of what and what
answer
Quantity and Demand
question
? = ? for breaking even
answer
price = cost
question
how does a monopoly increaes total revenue
answer
less output higher price
question
If a monopolistically competitive firm's marginal cost increases, then in order to maximize profits the firm will
answer
Reduce output and increase price
question
In the long-run, monopolistically competitive firms charge prices
answer
Equal to the minimum of average total cost
question
two things that dont shift the supply curve
answer
change in price or change in demand
question
What does change supply
answer
change in cost, tech, weather, sippliers
question
what doesnt shift demand curave
answer
change in price change in supply
question
what does shift demand curve
answer
change in taste and prefrences, change in income, change in price of other goods, change in population and change in price expectations
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