Elasticity in Economics

Using the formula: ΔQ / Q / (ΔP / P), we can calculate the own price elasticity of demand. Given the data, we have ΔQ = 50 - 60 = -10, Q = 50, ΔP = 15 - 10 = 5, P = 10. Plugging in the values, we get elasticity = (-10 / 50) / (5 / 10) = -2.

The demand for coffee products will likely increase, as consumers may substitute coffee for juice due to the higher price of juice.

The formula is: ε = (ΔQ / Q) / (ΔP / P)

<p>Income elasticity of demand is a measure of how responsive the quantity demanded is to a change in consumer income. It is calculated as: ε = (ΔQ / Q) / (ΔI / I)</p> Signup and view all the answers

<p>The linear demand function is Qx = 80 - 2Px. To find the elasticity of demand at a price of $20, we need to calculate the slope of the demand curve and the quantity demanded at that price.</p> Signup and view all the answers

<p>The three main factors are: availability of substitutes, time, and expenditure share.</p> Signup and view all the answers

<p>Cross-price elasticity measures the responsiveness of the demand for a good to changes in the price of a related good. It differs from own price elasticity, which measures the responsiveness to changes in the price of the good itself.</p> Signup and view all the answers

<p>The percentage change in one variable that arises due to a given percentage change in another variable.</p> Signup and view all the answers

<p>The percentage change in quantity demanded divided by the percentage change in the price of the good.</p> Signup and view all the answers

<p>The coefficient -2 represents the slope of the demand curve, which is related to the own price elasticity of demand.</p> Signup and view all the answers

<p>Its sign and whether it is greater or less than absolute value.</p> Signup and view all the answers

<p>The absolute value of the own price elasticity is greater than 1.</p> Signup and view all the answers

<p>The own price elasticity is infinite in absolute value, and the demand curve is horizontal.</p> Signup and view all the answers

<p>The absolute value of the own price elasticity is equal to 1.</p> Signup and view all the answers

<p>Elasticity of demand is a broader concept that measures responsiveness to changes in any variable, while price elasticity of demand is a specific type of elasticity that measures responsiveness to changes in price.</p> Signup and view all the answers

<p>Income elasticity of demand measures the responsiveness of quantity demanded to changes in income, while price elasticity of demand measures the responsiveness to changes in price.</p> Signup and view all the answers

<p>The demand for organic potatoes will decrease by 22.6%.</p> Signup and view all the answers

<p>The elasticity of demand with respect to rainfall is 3.</p> Signup and view all the answers

<p>The own price elasticity of demand is -3.</p> Signup and view all the answers

<p>The cross-price elasticity of demand is 4.</p> Signup and view all the answers

<p>The demand would increase by 30%.</p> Signup and view all the answers

<p>The income elasticity of demand is -.01.</p> Signup and view all the answers

<p>The demand would increase by 11.3%.</p> Signup and view all the answers

<p>The elasticity of demand with respect to advertising is 2.</p> Signup and view all the answers

<p>20%</p> Signup and view all the answers

<p>15% decrease</p> Signup and view all the answers

<p>20% decrease</p> Signup and view all the answers

<p>15% increase</p> Signup and view all the answers

<p>-21.6%</p> Signup and view all the answers

<p>30% increase</p> Signup and view all the answers

<p>36% increase</p> Signup and view all the answers

<p>18% increase</p> Signup and view all the answers

<p>-20%</p> Signup and view all the answers

<p>-27.12%</p> Signup and view all the answers

<p>From the demand function, we get Q1 = 60 and Q2 = 40. The percentage change is (40 - 60) / 60 = -33.33%. So, the quantity demanded decreases by approximately 33.33%.</p> Signup and view all the answers

<p>The availability of substitutes increases the own price elasticity of demand for a good. With more substitutes available, consumers are more responsive to price changes.</p> Signup and view all the answers

<p>Own price elasticity of demand measures responsiveness to changes in the good's own price, while cross-price elasticity measures responsiveness to changes in the price of a related good.</p> Signup and view all the answers

<p>If the income elasticity of demand is greater than 1, an increase in consumer income will lead to a more than proportionate increase in the demand for the good.</p> Signup and view all the answers

<p>A good with a small expenditure share tends to have a higher own price elasticity of demand.</p> Signup and view all the answers

<p>An increase in the price of a related good can either increase or decrease the demand for the original good, depending on whether the goods are substitutes or complements.</p> Signup and view all the answers

<p>A good has a unitary elastic demand when the elasticity of demand is equal to 1, meaning that the percentage change in quantity demanded is equal to the percentage change in price.</p> Signup and view all the answers

<p>The own price elasticity of demand tends to be higher in the long run compared to the short run, as consumers have more time to adjust their consumption patterns.</p> Signup and view all the answers

<p>A decrease in the price of a complementary good will increase the demand for the original good.</p> Signup and view all the answers

<p>First, find the quantity demanded at a price of $15, which is 50. Then, calculate the elasticity: (ΔQ / Q) / (ΔP / P) = (-10 / 50) / (5 / 15) = -2.</p> Signup and view all the answers

<p>The sign of elasticity indicates the direction of change in the quantity demanded in response to a change in the price of the good.</p> Signup and view all the answers

<p>Elastic demand means that the percentage change in quantity demanded is greater than the percentage change in price, whereas inelastic demand means that the percentage change in quantity demanded is less than the percentage change in price. Elastic demand implies that firms can increase revenue by decreasing price, while inelastic demand implies that firms can increase revenue by increasing price.</p> Signup and view all the answers

<p>The own price elasticity of demand is inversely related to the slope of the demand curve. A flatter demand curve indicates a more elastic demand, while a steeper demand curve indicates a less elastic demand.</p> Signup and view all the answers

<p>A unitary elastic demand means that the revenue of a firm remains constant, regardless of changes in price or quantity demanded.</p> Signup and view all the answers

<p>Perfectly elastic demand means that consumers are extremely responsive to price changes, whereas perfectly inelastic demand means that consumers are completely unresponsive to price changes. Perfectly elastic demand implies that consumers are highly sensitive to price changes, while perfectly inelastic demand implies that consumers are completely insensitive to price changes.</p> Signup and view all the answers

<p>The absolute value of elasticity determines the degree of responsiveness of the quantity demanded to changes in price. An absolute value greater than 1 indicates elastic demand, while an absolute value less than 1 indicates inelastic demand.</p> Signup and view all the answers

<p>An elastic demand implies that a decrease in price leads to an increase in revenue, while an inelastic demand implies that a decrease in price leads to a decrease in revenue.</p> Signup and view all the answers

<p>A change in the own price elasticity of demand implies a shift in the demand curve, with an increase in elasticity leading to a flatter demand curve and a decrease in elasticity leading to a steeper demand curve.</p> Signup and view all the answers

<p>The own price elasticity of demand measures the responsiveness of the quantity demanded to changes in the price of the good itself, while the cross-price elasticity of demand measures the responsiveness of the quantity demanded to changes in the price of another good.</p> Signup and view all the answers

<p>Understanding the elasticity concept is essential in determining the responsiveness of the quantity demanded to changes in price, income, and other factors, which is crucial in making informed decisions about pricing, production, and marketing strategies.</p> Signup and view all the answers