Microeconomics-
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
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show | measure to responsiveness to changes in prices or incomes
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show | an increase in price reduces the quantity demanded a lot (& vice versa)
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show | when same increase in price reduces quantity demanded just a little, then the demand curve is inelastic
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Elasticity is NOT EQUAL to slope but... | show 🗑
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Price elasticity of demand | show 🗑
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show | to avoid calculating different elasticities for rising vs falling prices, we calculate the price elasticity of demand using midpoint formula for percentage changes/instead of dividing by the initial quantity or price, we'll use the average quantity/price
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If the Price of a sushi roll drops from $8 to $4 and sales rise from 20 to 40 units, what is the (absolute value) of the price elasticity of demand? | show 🗑
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show | demand curve is inelastic
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show | demand curve is elastic
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|ED|=1 | show 🗑
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show | price times quantity demanded (sold)
TR=PxQ
-sellers need to know how elastic their good is so they can plan
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When demand is inelastic | show 🗑
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When demand is elastic | show 🗑
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show | quantity effect equals the price effect SO an increase in price exactly balances the reduction in the quantity demanded-in this instance total revenue doesn't change
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show | It will increase
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show | They think it's inelastic
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What Factors Determine the price elasticity of demand? | show 🗑
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Cross-price elasticity of demand | show 🗑
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show | positive
-an increase in the price of one brand of cookies will increase the demand for other brands
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show | negative
-increase in the price of milk causes a decrease in demand for oreos
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show | measures how sensitive the quantity demanded of a good is to changes in income
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For normal goods, income elasticity is......... | show 🗑
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show | negative
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Created by:
kthomas96