more likely to exhibit an elastic demand:
A) the shorter the time period in which people have to adjust to any price change.
B) the less elastic is the demand for any complementary goods.
C) the lower the price of the good relative to other goods.
D) the more people consider the good a luxury.
27. When two goods are complementary, the cross-price elasticity of demand:
A) is positive.
B) equals zero.
C) is negative.
D) may be either positive or negative.
28. If the number of apples sold falls from 700 to 500 when the price of oranges falls from $5 to $4 per bushel, the (arc) cross-price elasticity is:
29. If a good is a luxury, its income elasticity of demand is:
A) positive and less than 1.
B) negative but greater than -1.
C) positive and greater than 1.
30. Which one of the following is not a characteristic of an inferior…
included, availability, price and expansion of the diffused lines. In addition, the profile of the luxury consumer in the U.S was comprised of the top one percent of wage earners having incomes at $300,000 or higher per year (Thompson, 78). However, consumers falling under the middle income categories expressed an interest to own a luxury brand. A shift has been witnessed by this driving factor, causing middle class households to spend more on luxury goods and less on house hold needs causing…
Elasticity is used in economics to measure the degree of responsiveness in demand in relation to an alteration in price or income. Economists use the term price elasticity of demand to express how much a change in price influences demand. Comparable, cross price elasticity determines the change in demand of one product with the increase or decrease in price on a different product. Similarly, income elasticity of demand intends to measure the change in demand after a change in consumers’ income.…
Elasticity has been described as the degree of responsiveness of the quantity demanded relative to the factors that influence the quantity demanded (“Definition of Elasticity”, n.d.). There are two types of elasticity, the elasticity of demand which includes price elasticity of demand, income elasticity of demand, and cross elasticity of demand (McConnell, Brue, & Flynn, 2012). There is also elasticity of supply. Elasticity can vary among products because there are some goods that may be more…
What are the factors that determine the quantity of a good that buyers demand?
There are five main factors that determine the quantity of a good that a buyer would demand, they are:
If the income of the customer base goes up or down it will change the buying habits of the customers. If the customers have more money to spend then the more goods they will demand. If the customers have less money to spend then they will demand less goods.
2.Prices of related goods
In this factor if a…
Socio-political and Economic Comparisons
Based on Mankiw (2012), the law of demand infers that a decline in the price of a good increases the quantity demanded. Therefore, the price elasticity of demand gauges how much the quantity demanded reacts to a change in price. Demand for a product is deemed to be elastic in scenarios where the quantity demanded reacts considerably to changes in the price. Demand is described as inelastic if the quantity demanded responds only slightly to changes in the…
- for price elasticity of demand is the proportional change in demand given a change in price( Patrick L et al. 1997)
PED = ( % change in the quantity demand)/(% change in the price) = (%∆QD)/(%∆P)
Or % ∆ QD mearused as follows for two different quantities
Similarly the % ∆P = (price2-price1)/(price1+price 2/2)
Therefore, midpoint method for calculating price elasticity of demand is the change in quantity…
university will need to be able to figure out the “coefficient of price elasticity of demand (Ed) The numerical measure of price elasticity of demand, equal to the percent change in quantity demanded of good divided by the percent change in its price” (Amacher & Pate, 2013) and coefficient of price elasticity of supply (Es) The numerical measure of price elasticity of supply equal to the percent change in the quantity supplied of a good divided by the percent change in its price” (Amacher &…
The cross elasticity of demand is the measure of responsiveness of the demand for a good towards the change in the price of a related good is called cross price elasticity of demand. It is always measured in percentage terms. With the consumption behavior being related, the change in the price of a related good leads to a change in the demand of another good. Related goods are of two kinds, i.e. substitutes and complementary goods. In case the two goods are not related, the Coefficient of Cross…
expectations he had before buying the car. In this stage, Andrew is either satisfied or dissatisfied.
2.4. CONSUMER BEHAVIOUR AND UTILITY THEORY
2.4.1. Law of Diminishing Marginal Utility
This is the additional satisfaction a consumer gets by buying an additional unit. A good example to explain this would be if you go to a coffee shop to drink a cup of coffee. The price of a cup of coffee is
3. CONSUMER SURPLUS, PRODUCER SURPLUS & ELASTICITY
3.1. DEMAND CURVE