Quiz & HW_Elasticity
If the price elasticity of demand for a good is less than one in absolute value, economists would characterize consumers of this good
as not very sensitive to（price）.
What section of a straight-line demand curve is elastic? The elasticity of demand is elastic
at all points above the curve's midpoint.
Elasticity along a downward sloping linear demand curve
changes along the curve.
If the price of orange juice rises 10%, and as a result the quantity demanded falls by 8%, the price elasticity of demand for orange juice is
inelastic.
The percentage change in the quantity demanded in response to a percentage change in the price is known as the
price elasticity of demand.
The cross price elasticity of demand between two goods will be positive if
the two goods are substitutes.
If demand is inelastic
then it changes very little in response to a price change.
If the cross price elasticity of two goods is minus3.5, then
these two products are relatively elastic complements.
The elasticity of demand is
unitless.
A horizontal demand curve for a good could arise because consumers
view this good as identical to another good.
Suppose that the demand curve for wheat in each country is perfectly inelastic up to some "choke" price plong dasha price so high that nothing is boughtlong dashso that the demand curve is vertical at Q at prices below p and horizontal at p. If p and Q vary across countries, what does the world's demand curve look like? Discuss how the elasticity of demand varies with the price along the world's demand curve. Assuming many countries, the world's demand curve for wheat can best be described as
downward sloping; Elasticity along the world's demand curve for wheat (will increase with price). ********************** The elasticity of demand is the percentage change in quantity divided by the percentage change in price: epsilonequalsStartFraction percentage change in quantity demanded Over percentage change in price EndFraction epsilonequalsStartFraction Upper Delta Upper Q divided by Upper Q Over Upper Delta p divided by p EndFraction equalsStartFraction Upper Delta Upper Q Over Upper Delta p EndFraction left parenthesis StartFraction p Over Upper Q EndFraction right parenthesis . The elasticity of demand is likely different at every point along a downward-sloping demand curve. Consider, for example, a linear, downward sloping demand curve. Although StartFraction Upper Delta Upper Q Over Upper Delta p EndFraction is constant on such curves, the price-quantity ratio varies as we move along the demand curve, so the elasticity must also vary. The elasticity of demand is a more negative number the higher the price and hence the smaller the quantity. For quantities between the midpoint of a linear demand curve and the lower end where pequals0, the demand elasticity lies between zero and negative one. A point along the demand curve where the elasticity is between 0 and minus1 is inelastic. At the midpoint of a linear demand curve, elasticity is unitary. At prices higher than the midpoint of a linear demand curve, the elasticity is a more negative number because it is larger in absolute value. In this range, the demand curve is called elastic. In a unique case, it is possible for a downward sloping demand curve that is not linear to have a constant elasticity.
If the price elasticity of demand for a good is greater than one in absolute value, economists characterize that demand is
elastic.
A vertical demand curve
reasonably represents demand for essential goods.