question
Elasticity
answer
a measure of how much buyers and sellers respond to changes in market conditions.
question
Elasticity
answer
helps us study not only direction of the effects but also the magnitudes where there is an event that would affect the demand and supply conditions in the market or some policy change
question
price elasticity of demand
answer
it measures how much the quantity demanded would respond to a change in the price
question
price elasticity of demand
answer
this would show how much the consumers are willing to move away from the good as its price rises
question
elastic
answer
quantity demanded responds substantially to changes in price
question
Inelastic
answer
quantity demanded responds only slightly to changes in price
question
Determinants of Price Elasticity of Demand
answer
availability of close substitutes, necessities vs luxuries, definition of the market, time horizon
question
availability of close substitutes
answer
the more substitutes a good has, the more elastic its demand and the higher response to change in price - the less substitutes, the more inelastic and a lower response to change in price
question
Necessities vs. Luxuries
answer
necessities: inelastic
luxuries: elastic
luxuries: elastic
question
Definition of the Market
answer
In a narrowly defined market, consumers have more substitutes available
The more narrowly we define a market, the more elastic demand will be
The more narrowly we define a market, the more elastic demand will be
question
Time Horizon
answer
-the longer the time horizon, the more elastic the demand is
question
price elasticty of demand
answer
the percentage change in quantity demanded relative to a percentage change in price
question
price elasticities
answer
given in absolute values
question
total revenue
answer
does NOT equal profit
question
profit
answer
total revenue minus total cost
question
total revenue
answer
Price x Quantity
question
total revenue
answer
the amount paid by buyers and received by sellers
question
price elasticity of demand
answer
change in total revenue with respect to a change in price would depend on?
question
constant ; elasticity
answer
the slope of a linear demand curve is ? but not the ?
question
unit elastic
answer
=1
question
Revenue Function
answer
the functional relationship that shows the total revenue (p x q) received by a producer as a function of the level of output
question
average revenue function
answer
The functional relationship that shows the revenue per unit of output received by the producer at different levels of output
question
marginal revenue function
answer
The functional relationship that shows the additional revenue a producer receives by selling an additional unit of output at different levels of output
question
income elasticity of demand
answer
it measures how the quantity demanded changes as consumer income changes
question
income elasticity of demand
answer
% change in quantity demanded / % change in income
question
cross-price elasticity of demand
answer
it measures how the quantity demanded of one good changes as the price of another good changes
question
cross-price elasticity of demand
answer
% change in quantity demanded of good 1 / % change in price of good 2
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
