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Microeconomics Own-Price Elasticity Chapter

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Microeconomics Own-Price Elasticity Chapter

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Questions and Answers

What is the formula for own-price elasticity of demand?

Percentage change in quantity / Percentage change in price

What is the formula for income elasticity of demand?

Percentage change in quantity / Percentage change in income

What is the formula for cross-price elasticity of demand?

Percentage change in quantity of good A / Percentage change in price of good B

What does arc elasticity refer to?

Range along the demand curve Signup and view all the answers

What does point elasticity refer to?

Point on the demand curve Signup and view all the answers

What is the reciprocal of own-price elasticity called?

Own-price flexibility Signup and view all the answers

Own-price elasticity of demand is calculated using the formula: Percentage change in quantity / Percentage change in _____

price Signup and view all the answers

What does the subscript 'a' represent in the formulas provided?

After (B) Signup and view all the answers

In the equation for arc elasticity, what does the formula 'P = (Pa + Pb) / 2' signify?

The average price (A) Signup and view all the answers

What is the own-price elasticity of demand?

Percentage change in quantity demanded divided by percentage change in price. Signup and view all the answers

What is the formula for arc elasticity?

Arc elasticity = [$rac{ΔQ}{ΔP}$] x [$rac{P}{Q}$] Signup and view all the answers

What is income elasticity of demand?

Percentage change in quantity demanded divided by percentage change in income. Signup and view all the answers

What is cross-price elasticity of demand?

Percentage change in quantity demanded of one good divided by percentage change in price of another good. Signup and view all the answers

Which of the following is the formula for own-price elasticity of demand?

Own-price elasticity = %ΔQ / %ΔP (C) Signup and view all the answers

Study Notes

Own-Price Elasticity of Demand

Own-price elasticity of demand measures the responsiveness of quantity demanded to changes in price.
It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
There are two approaches to calculating own-price elasticity of demand: arc elasticity and point elasticity.
Arc elasticity measures elasticity over a range of prices and quantities.
Point elasticity measures elasticity at a specific point on the demand curve.
Arc elasticity can be calculated using the following formula:

[QP] x [PQ]

Where:
- P is the average price of the two points, calculated as (Pa + Pb)/2
- Q is the average quantity of the two points, calculated as (Qa + Qb)/2
- Q is the change in quantity, calculated as (Qa – Qb)
- P is the change in price, calculated as (Pa – Pb)
The "bar" over the P and Q variables indicate an average or midpoint.
Arc elasticity is an average elasticity over a range of prices.
Point elasticity is an elasticity measured at a specific point on the demand curve.

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Description

Explore the concept of own-price elasticity of demand in this chapter quiz. Learn the distinction between arc and point elasticity methods for calculating this critical economic measure. Test your understanding of the formulas and applications of elasticity in demand analysis.