Micro Ch. 6

Change in price/QD

(Q2 - Q1) / Same with price (Q1 + Q2) /2

If the demand for orange juice is elasticelastic​, will a decreasea decrease in the price of orange juice increase or decrease the revenue received by orange juice​ sellers?

If the price of orange juice decreasesd​, revenue will increase .

Which determinant is the most​ important?

The availability of close substitutes is the most important determinant.

For which of the following products is the price elasticity of demand​ (in absolute​ value) the​ largest?

Tide liquid detergent

Is it possible to tell from the income elasticity of demand whether a product is a luxury good or a​ necessity?

Yes. If the income elasticity of demand is greater than​ 1, then the good is a luxury. If the income elasticity of demand is positive but less than​ 1, then the good is a necessity.

The key determinants of the price elasticity of demand for a product​ are:

availability of close​ substitutes, passage of​ time, necessities versus​ luxuries, definition of the​ market, and share of the good in the​ consumer's budget.

Price elasticity of demand

change in Demand / change in Price

If the​ cross-price elasticity of demand is​ negative, then the products​ are:

complements, but if it is​ positive, then the products are substitutes.

less than 1 %

inelastic

greater than 1 %

elastic

If a supply curve is a vertical​ line, it is​ ________, and if it is a horizontal​ line, it is​ ________.

perfectly inelastic and has an elasticity value of​ zero; perfectly elastic and has an elasticity value of infinity

For a normal​ good, the income elasticity of demand will be

positive, but for an inferior​ good, the income elasticity of demand will be negative.

From 1950 to 2015 the number of people who lived on farms fell from 23 million to fewer than 3 million. Which of the following factors have contributed to this​ trend?

rapid growth in farm production and low income and price elasticities for food products

The demand for agricultural products is​ inelastic, and the income elasticity of demand for agricultural products is low. How do these facts help explain the disappearing family​ farm? The family farm has been disappearing because

the demand for food has not increased proportionally with increases in​ income, and increases in the supply of food have resulted in significant decreases in food prices.

Income elasticity of demand is

the percentage change in quantity demanded divided by the percentage change in income.

The​ cross-price elasticity of demand is

the percentage change in quantity demanded of one good divided by the percentage change in the price of another good.

The formula for the price elasticity of supply is

the percentage change in quantity supplied divided by the percentage change in price.

1.00

unit elastic