Quiz & HW_Elasticity

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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 minus​3.5, 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 pequals​0, 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.


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