Chapter 6 (6.0-6.2)

Question 1

Elasticity

Answer 1

measure of the responsiveness of how quantity responds with price

Question 2

Elastic demand

Answer 2

Qd responds strongly to a change in price

Question 3

Inelastic demand

Answer 3

Qd responds weakly to a change in price

Question 4

1. Ed equation (percentage)

Answer 4

Ed=percentage change in quantity demanded of product x/ percentage change in price of product x

Question 5

2. Ed equation (midpoint)

Answer 5

Ed= (change in quantity divided by (the sum of original and new quantity)/2) divided by (the change in price
divided the sum of the new and original price)/2)

Question 6

price elasticity of demand formula pros: (4)

Answer 6

uses percentages, unit free measure, COMPARE RESPONSIVENESS ACROSS PRODUCT, no minus sign

Question 7

Ed>1

Answer 7

elastic %change in Qd is > %change in P

Question 8

Ed=1

Answer 8

unit elastic %change in Qd= %change in P

Question 9

Ed<1

Answer 9

inelastic. %change in Qd is < %change in P

Question 10

Perfectly elastic graph with quantity on X and price on Y and what does it equals

Answer 10

horizontal line on graph = oo

Question 11

perfectly inelastic graph with price on Y and quantity on X and what does it equal

Answer 11

vertical line on graph equals zero

Question 12

Total Revenue

Answer 12

TR=PxQ

Question 13

TR changes in the opposite direction as price, demand is:

Answer 13

Elastic P-decrease TR-Increases

Question 14

TR changes in same direction as price, demand is:

Answer 14

Inelastic P-decreases TR-decreases

Question 15

TR does not change when price changes demand is:

Answer 15

Unit Elastic P-decreases TR-unchanged

Question 16

Describe Elasticity along a demand straight line or curve

Answer 16

Demand is more elastic toward the upper left, demand is more inelastic towards the lower right

Question 17

Study Graphs from slides

Answer 17

Elasticity graphs with respect to total revenue