Do you want BuboFlash to help you learning these things? Or do you want to add or correct something? Click here to log in or create user.
#cfa #cfa-level-1 #economics #has-images #microeconomics #reading-13-demand-and-supply-analysis-introduction
Own-Price Elasticity of Demand
B. Areas C and E are smaller than area A, so demand must be inelastic between $10 and $30.
C. Area F is smaller than areas B and C, so demand must be inelastic between $10 and $30.
Demand can be inelastic, unit elastic, or elastic, and can range from zero to infinity. (Note: the negative sign is ignored.)
- If the elasticity coefficient is greater than 1, demand is elastic. A small price change leads to a large change in the quantity demanded. The more elastic the demand, the flatter the demand curve over any specific range. Demands for goods with many substitutes (e.g., juice) are relatively elastic. If the demand curve of a good is completely horizontal, the demand is perfectly elastic. Consumers will buy all of that good at the market price.
- When the elasticity coefficient is less than 1, demand is inelastic. The more inelastic the demand, the steeper the demand curve. Demands for goods with few substitutes (e.g., cigarettes) are relatively inelastic.
- When the elasticity coefficient is equal to 1, demand is said to be unitary elastic.
Because elasticity is a relative concept, the elasticity of a straight-line demand curve will differ at each point along the demand curve. Specifically, a straight-line demand curve is more elastic when price is high. Note that the elasticity is not the slope of the demand curve. Elasticity is used since it is independent of the units of measure.
Example 2
Refer to the graph below. Which of the following is true?
A. Areas C and E are smaller than area A, so demand must be elastic between $10 and $30.
B. Areas C and E are smaller than area A, so demand must be inelastic between $10 and $30.
C. Area F is smaller than areas B and C, so demand must be inelastic between $10 and $30.
Answer: C. Since at $30 the demand is unit elastic, at prices below $30 demand is inelastic. This is because when price rises from $10 to $30, the revenue gained is greater than the revenue lost.
If you want to change selection, open document below and click on "Move attachment"
Subject 7. Demand Elasticities
a price change. Example 1 A Pizza Hut store can sell 50 pizzas per day at $7 each or 70 pizzas per day at $6 each. The price elasticity is: [(50 - 70)/60] / [(7 - 6) / 6.5] = -2.17. <span>Own-Price Elasticity of Demand Demand can be inelastic, unit elastic, or elastic, and can range from zero to infinity. (Note: the negative sign is ignored.) If the elasticity coefficient is greater than 1, demand is elastic. A small price change leads to a large change in the quantity demanded. The more elastic the demand, the flatter the demand curve over any specific range. Demands for goods with many substitutes (e.g., juice) are relatively elastic. If the demand curve of a good is completely horizontal, the demand is perfectly elastic. Consumers will buy all of that good at the market price. When the elasticity coefficient is less than 1, demand is inelastic. The more inelastic the demand, the steeper the demand curve. Demands for goods with few substitutes (e.g., cigarettes) are relatively inelastic. When the elasticity coefficient is equal to 1, demand is said to be unitary elastic. Because elasticity is a relative concept, the elasticity of a straight-line demand curve will differ at each point along the demand curve. Specifically, a straight-line demand curve is more elastic when price is high. Note that the elasticity is not the slope of the demand curve. Elasticity is used since it is independent of the units of measure. Example 2 Refer to the graph below. Which of the following is true? A. Areas C and E are smaller than area A, so demand must be elastic between $10 and $30. B. Areas C and E are smaller than area A, so demand must be inelastic between $10 and $30. C. Area F is smaller than areas B and C, so demand must be inelastic between $10 and $30. Answer: C. Since at $30 the demand is unit elastic, at prices below $30 demand is inelastic. This is because when price rises from $10 to $30, the revenue gained is greater than the revenue lost. The Factors that Influence the Elasticity of Demand The elasticity of demand among products varies substantially. The determinants of price and i
Subject 7. Demand Elasticities
a price change. Example 1 A Pizza Hut store can sell 50 pizzas per day at $7 each or 70 pizzas per day at $6 each. The price elasticity is: [(50 - 70)/60] / [(7 - 6) / 6.5] = -2.17. <span>Own-Price Elasticity of Demand Demand can be inelastic, unit elastic, or elastic, and can range from zero to infinity. (Note: the negative sign is ignored.) If the elasticity coefficient is greater than 1, demand is elastic. A small price change leads to a large change in the quantity demanded. The more elastic the demand, the flatter the demand curve over any specific range. Demands for goods with many substitutes (e.g., juice) are relatively elastic. If the demand curve of a good is completely horizontal, the demand is perfectly elastic. Consumers will buy all of that good at the market price. When the elasticity coefficient is less than 1, demand is inelastic. The more inelastic the demand, the steeper the demand curve. Demands for goods with few substitutes (e.g., cigarettes) are relatively inelastic. When the elasticity coefficient is equal to 1, demand is said to be unitary elastic. Because elasticity is a relative concept, the elasticity of a straight-line demand curve will differ at each point along the demand curve. Specifically, a straight-line demand curve is more elastic when price is high. Note that the elasticity is not the slope of the demand curve. Elasticity is used since it is independent of the units of measure. Example 2 Refer to the graph below. Which of the following is true? A. Areas C and E are smaller than area A, so demand must be elastic between $10 and $30. B. Areas C and E are smaller than area A, so demand must be inelastic between $10 and $30. C. Area F is smaller than areas B and C, so demand must be inelastic between $10 and $30. Answer: C. Since at $30 the demand is unit elastic, at prices below $30 demand is inelastic. This is because when price rises from $10 to $30, the revenue gained is greater than the revenue lost. The Factors that Influence the Elasticity of Demand The elasticity of demand among products varies substantially. The determinants of price and i
Summary
| status | not read | reprioritisations | ||
|---|---|---|---|---|
| last reprioritisation on | suggested re-reading day | |||
| started reading on | finished reading on |
Details
Discussion
Do you want to join discussion? Click here to log in or create user.