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