STANDARD XII (ISC) ECONOMICS Chapter 4: Elasticity of Demand
|
|
- Joleen Stanley
- 5 years ago
- Views:
Transcription
1 STANDARD XII (ISC) ECONOMICS Chapter 4: Elasticity of Demand Meaning of Elasticity of Demand The term elasticity indicates responsiveness of one variable to a change in another variable. For example, when variable X responds to a change in variable Y, variable X is said to be elastic. Price Elasticity of demand. Price elasticity of demand measure the degree of responsiveness of demand for a commodity due to change in its price % Change in quantity demanded. Ed= % Change in Price The different kinds/ degree of Price Elasticity of demand The different types are:- 1. Perfectly Elastic demand : When no change or a very small change in price causes an infinite change in quantity demanded of a commodity. Ed = Price Rs Qty demanded (Kgs) Perfectly Inelastic demand: When there is no change in demand inspite of substantial increase or decrease in price. ( 1 )
2 Price Qty dd Ed= Relatively Elastic Demand: When a percentage change in demand is much greater than percentage change in price. Ed > 1 Price Rs Qty dd (Kgs) Unit elastic demand. When the extension or contraction in demand is proportional to price changes. The demand curve takes the shape of rectangular hyperbola. Ed = 1 Price Rs Qty dd (Kgs) ( 2 )
3 5. Relatively Inelastic demand: When a substantial change in prices has little effect on extension or contraction in demand of the commodity. Ed < 1 Price Rs Qty dd (Kgs) 8 90 Factors Affecting the Price Elasticity of Demand 1) Nature of a commodity: If you regard a product as a necessity, then your demand for it will be inelastic: you re willing to pay any reasonable price, e.g. gasoline If you think it s a luxury, then your demand is very elastic and it may drop considerably due to an increase in price, e.g. IPL ticket, car. 2) Availability of substitutes: The more possible substitutes, the greater the elasticity. Example. Coke and Pepsi. If the price of coke goes up, people will be tempted to buy Pepsi. The demand of coke will therefore fall. In case of salt, it has no close substitute and is necessary.its demand is inelastic. ( 3 )
4 3) Proportion of Total expenditure spent: Products that consume a small portion of the consumer s income its demand is inelastic. Example, a consumer spends a very small proportion of income on purchase of match boxes. Therefore, even large change in its price will not induce him to change his level of demand. 4) Time period : Elasticity tends to be greater over the long run because consumers have more time to adjust their behavior and vice-versa. 5) Number of uses: The greater the number of uses of a commodity, the higher is the price elasticity of demand. Example. milk can be used to make cheese, butter, curd etc. If its price rises, it will be put to only important uses like serving the children or for the sick members in the family. 6) Possibility of postponement: If the demand for a particular commodity cannot be postponed its demand will be inelastic, Example medicines, food etc. 7) Habits: Those goods which have become habitual necessities for the consumers, have low price elasticity. Example. Cigarettes, drugs etc 8) Price-level: Highly and low priced goods have low price elasticity or inelastic demand. Example diamonds and coarse cloths Medium-class commodities are more elastic. Example, watches. Cycles etc. Percentage method/proportionate method of elasticity of demand. The elasticity of demand is measured by dividing % change in quantity demanded of a product to the % change in price. Ed= Percentage change in quantity demanded. Percentage change in price. ( 4 )
5 TYPES OF ELASTICITY OF DEMAND. 1. Price elasticity of demand. Price elasticity of demand measure the degree of responsiveness of demand for a commodity due to change in its price % Change in quantity demanded. Ed= % Change in Price 2. Income elasticity of demand. Income elasticity of demand measure the degree of responsiveness of demand for a commodity due to change in income. % Change in quantity demanded. Ey= % Change in Income. Types of income elasticity of demand. i. Positive income elasticity of demand They are those goods, the demand for which increases with the increase in income of the consumer. This happens in case of normal goods. For normal commodities we can classify elasticity into following:- Income elastic when the percentage change in quantity demanded is more than the percentage change in the income Income inelastic - when the percentage change in quantity demanded is less than the percentage change in the income Unitary income elastic - when the percentage change in quantity demanded is equal to the percentage change in the income ii. iii. Negative income elasticity of demand They are those goods, the demand for which falls as income of the consumer increases. This happens in case of inferior goods. Zero income elasticity of demand When there is no change in demand in spite of substantial increase or decrease in income, the demand is called perfectly income Inelastic. ( 5 )
6 This happens in case of inexpensive necessities Cross elasticity of demand. Cross elasticity of demand measure the degree of responsiveness of demand for a commodity X due to change in price of Y % Change in quantity demanded of X Ec= % Change in Price of Y Types of cross elasticity of demand. i. Positive cross elasticity of demand Cross elasticity of demand in case of substitute goods will be positive because a change in price of one commodity will change the demand for another commodity in the same direction. Ex. When there is rise in price of tea demand for coffee will increase. ii. Negative cross elasticity of demand Cross elasticity of demand in case of complementary goods will be negative because a change in price of one commodity will change the demand for another commodity in the opposite direction. Ex. If price of petrol will go up demand for car will decrease. iii. Zero cross elasticity of demand. Commodities which are not related to each other other have zero cross elasticity of demand. Ex. any change in price of milk will not bring any change in the demand for cloth. Expenditure method of calculating elasticity To identify elasticity by the expenditure method follow the following table The above table is refelected in the graph below: ( 6 )
7 Geometric Method of calculating elasticity Geometric method was suggested by Prof. Marshall and is used to measure the elasticity at a point on the demand curve. When there are infinitely small changes in price and demand, then the Geometric Method is used. This method is also known as Graphic Method or Point Method or Arc Method. Elasticity of demand (Ed) is different at different points on the same straight line demand curve. In order to measure Ed at any particular point, lower portion of the curve from that point is divided by the upper portion of the curve from the same point. Elasticity of Demand (Ed) = Lower segment of demand curve (LS) / Upper segment of demand curve (US) Following the above formula we get the following different values at different points ondd To calculate elasticity of demand on a non-linear demand curve ( 7 )
8 In order to measure elasticity in case of a non linear curve we draw a tangent at the given point R on the demand curve DD and then measure price elasticity by finding out the value of RT /RT. INSTRUCTIONS TO STUDY THIS CHAPTER: Please read your book for detailed information of the above topics. The length of the answer depends on the marks in the question paper and may not only be substituted with what is mentioned in the notes. Examples can be used to elaborate your points for this chapter. ( 8 )
ECONOMICS CHAPTER 4: ELASTICITY OF DEMAND Class: XII (ISC) Meaning of Elasticity of Demand
Meaning of Elasticity of Demand ECONOMICS CHAPTER 4: ELASTICITY OF DEMAND Class: XII (ISC) 2017-2018 The term elasticity of demand indicates responsiveness of quantity demanded due to change in any of
More informationFirst Term Weekly Test ECONOMICS. ECONOMICS STD 10 (ICSE) Ch. 3. ELASTICITY OF DEMAND
First Term Weekly Test ECONOMICS ECONOMICS STD 10 (ICSE) Ch. 3. ELASTICITY OF DEMAND 1. What is the meaning of Elasticity of Demand? Ans. The term elasticity indicates responsiveness of one variable to
More informationDr. Mahmoud A. Arafa Elasticity. Income positive negative. Cross positive negative
Introduction: When the price of a goods falls, its quantity demanded rises and when the price of the goods rises, its quantity demanded falls. This is generally known as law of demand. This law of demand
More informationCONSUMER'S BEHAVIOUR & THEORY OF DEMAND
UNIT 2 CONSUMER'S BEHAVIOUR & THEORY OF DEMAND POINTS TO REMEMBER Consumer : is an economic agent who consumes final goods and services. Total utility : It is the sum of satisfaction from consumption of
More informationUNIT 2 CONSUMER'S BEHAVIOUR & THEORY OF DEMAND POINTS TO REMEMBER Consumer : is an economic agent who consumes final goods and services. Total utility : It is the sum of satisfaction from consumption of
More informationECONOMICS CHAPTER 2: LAW OF DEMAND Class: XII (ISC)
q ECONOMICS CHAPTER 2: LAW OF DEMAND Class: XII (ISC) 2018-2019 Demand is the desire backed by the ability and willingness to buy that commodity. Ex. Household purchases 5 kgs of sugar per day @ Rs. 20
More informationDOWNLOAD PDF ELASTICITY OF DEMAND IN ECONOMICS
Chapter 1 : Economics Basics: Elasticity Elasticity in this case would be greater than or equal to blog.quintoapp.com elasticity of supply works similarly to that of demand. Remember that the supply curve
More informationQ.1 Distinguish between increase in demand and increase in quantity demanded of a commodity.
Q.1 Distinguish between increase in demand and increase in quantity demanded of a commodity. Q. 2 Given price of a good, how does a consumer decide as to how much of that good to buy? Q. 3 A consumer consumers
More information07. Engel s Law of family expenditure and significance. - Consumer's surplus estimation and applications.
07. Engel s Law of family expenditure and significance. - Consumer's surplus estimation and applications. Engel s Law on Family Expenditure Every family has to spend money on necessaries of life, education,
More informationChapter 6 Elasticity: The Responsiveness of Demand and Supply
Economics 6 th edition 1 Chapter 6 Elasticity: The Responsiveness of Demand and Supply Modified by Yulin Hou For Principles of Microeconomics Florida International University Fall 2017 The Price Elasticity
More informationCopyright 2010 Pearson Education Canada
What are the effects of a high gas price on buying plans? You can see some of the biggest effects at car dealers lots, where SUVs remain unsold while sub-compacts sell in greater quantities. But how big
More information2. The producers of a product with an elastic demand will have a strong incentive to reduce the price of their product.
Learning activity 5 True/False answers 1. If the price elasticity of the demand for chocolates is greater than one, then the manufacturers of chocolates can increase their total revenue by raising the
More information2007 Thomson South-Western
Elasticity... allows us to analyze supply and demand with greater precision. is a measure of how much buyers and sellers respond to changes in market conditions THE ELASTICITY OF DEMAND The price elasticity
More informationECON 101 Introduction to Economics1
ECON 101 Introduction to Economics1 Session 6 The Concept of Elasticity I Lecturer: Mrs. Helen A. Seshie-Nasser, Department of Economics Contact Information: @ug.edu.gh College of Education School of Continuing
More informationThe price elasticity of demand when price decreases from $9 to $7 is A B C D -1.
Varsity Economics Product Market: Elasticity 1 The price elasticity of demand is a measure of the A effect of changes in demand on the price. B relationship between price and profitability. C responsiveness
More information1. Explain 2. Describe 3. Create 4. Interpret
Law of Demand Section:- B Objectives 1. Explain the law of demand. 2. Describe how the substitution effect and the income effect influence decisions. 3. Create a demand schedule for an individual and a
More informationDEMAND ANALYSIS. Samir K Mahajan, M.Sc, Ph.D.,UGC-NET Assistant Professor (Economics)
DEMAND ANALYSIS Samir K Mahajan, M.Sc, Ph.D.,UGC-NET Assistant Professor (Economics) DEMAND DETERMINANTS Demand determinants refer to the factors that affect demand for commodity (a consumer good), such
More information1.2.3 Price, Income and Cross Elasticities of Demand
1.2.3 Price, Income and Cross Elasticities of Demand Price elasticity of demand The price elasticity of demand is the responsiveness of a change in demand to a change in price. The formula for this is:
More informationDavid Kelly. Elasticity
Elasticity Elasticity is a measure of responsiveness (sensitivity) of the quantity demanded for a good or service to a change in some variable (price, income, related goods) Price Elasticity of Demand
More informationUnit 1 DEMAND AND SUPPLY ANALYSIS
Unit 1 DEMAND AND SUPPLY ANALYSIS 1 LESSON 1 ELASTICITY OF DEMAND AND APPLICATIONS 1. STRUCTURE 1.1. Objective 1.2. Introduction 1.3. Meaning of Elasticity of Demand 1.4. Types of Elasticity of Demand
More informationChapter 4 DEMAND. Essential Question: How do we decide what to buy?
Chapter 4: Demand Section 1 Chapter 4 DEMAND Essential Question: How do we decide what to buy? Key Terms demand: the desire to own something and the ability to pay for it law of demand: consumers will
More informationCHAPTER 2 THEORY OF DEMAND AND SUPPLY. Unit 3. Supply. The Institute of Chartered Accountants of India
CHAPTER 2 THEORY OF DEMAND AND SUPPLY Unit 3 Supply Learning Objectives At the end of this unit you will be able to : understand the meaning of supply. understand what determines supply. get an insight
More informationTheory of Demand and Supply 2
C H A P T E R Theory of Demand and Supply 2 Law of Demand and Elasticity of Demand Meaning of Demand u In ordinary speech, the term demand is many times confused with desire or want. u Desire is only a
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
MBA 640, Survey of Macroeconomics Fall 2006, Quiz #2 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The price elasticity of demand is defined
More informationThe law of supply states that higher prices raise the quantity supplied. The price elasticity of supply measures how much the quantity supplied
In a competitive market, the demand and supply curve represent the behaviour of buyers and sellers. The demand curve shows how buyers respond to price changes whereas the supply curve shows how sellers
More informationChapter 6 Elasticity: The Responsiveness of Demand and Supply
hapter 6 Elasticity: The Responsiveness of emand and Supply 1 Price elasticity of demand measures: how responsive to price changes suppliers are. how responsive sales are to changes in the price of a related
More informationEQ: What is Income Elasticity of Demand?
EQ: What is Income Elasticity of Demand? Changes in Consumer Income shift the demand curve: Normal Goods goods that are more desirable to consumers; when people have more money, they buy more normal goods
More informationLEARNING UNIT 6 LEARNING UNIT 6
DATE: March 2014 MODULE: PMIC6111 TEXTBOOK REFERENCE: pg 153-173 THEME: ELASTICITY OBJECTIVES: BY END OF YOU SHOULD KNOW THE FOLLOWING: DEFINE ELASTICITY EXPLAIN MEANING AND SIGNIFICANCE OF PRICE ELASTICITY
More informationUnit 2: Theory of Consumer Behaviour
Name: Unit 2: Theory of Consumer Behaviour Date: / / Notations and Assumptions A consumer, in general, consumes many goods; but for simplicity, we shall consider the consumer s choice problem in a situation
More informationUNIT-1 INTRODUCTION TO MANAGERIAL ECONOMICS
UNIT-1 INTRODUCTION TO MANAGERIAL ECONOMICS Introduction to Economics Economics is a study of human activity both at individual and national level. Any activity involved in efforts aimed at earning money
More informationChapter 4 Review: Demand. CHAPTER 4 Graphic Organizer
Chapter 4 Review: Demand CHAPTER 4 Graphic Organizer CHAPTER 4, SECTION 1 Key Concepts What Is Demand? A market is a place where people buy and sell things. A market has two sides. There is a buying side
More informationLesson-9. Elasticity of Supply and Demand
Lesson-9 Elasticity of Supply and Demand Price Elasticity Businesses know that they face demand curves, but rarely do they know what these curves look like. Yet sometimes a business needs to have a good
More informationDEMAND ANALYSIS. Samir K Mahajan, M.Sc, Ph.D.,UGC-NET Assistant Professor (Economics)
DEMAND ANALYSIS Samir K Mahajan, M.Sc, Ph.D.,UGC-NET Assistant Professor (Economics) MEANING OF DEMAND Demand is effective desire which can be fulfilled. Demand must satisfy the following prerequisites:
More informationCh. 7 outline. 5 principles that underlie consumer behavior
Ch. 7 outline The Fundamentals of Consumer Choice The focus of this chapter is on how consumers allocate (distribute) their income. Prices of goods, relative to one another, have an important role in how
More informationJ. K. SHAH CLASSES. NAME : TOTAL MARK : 30 Total time: 1 HR.30 minutes BATCH :
J. K. SHAH CLASSES NAME : TOTAL MARK : 30 BRANCE : Total time: 1 HR.30 minutes BATCH : SOLUTION Ans.1. (A) Fill in the blanks using appropriate answer (04) 1. Decrease 2. Gossen s 3. Contracts 4. Negative
More informationElasticity and Its Applications. Copyright 2004 South-Western
Elasticity and Its Applications 5 Copyright 2004 South-Western Copyright 2004 South-Western/Thomson Learning Elasticity... allows us to analyze supply and demand with greater precision. is a measure of
More informationThis is what we call a demand schedule. It is a table that shows how much consumers are willing and able to purchase at various prices.
Demand Market: an institution or mechanism, which brings together buyers ("demanders") and sellers ("suppliers") of particular goods and services. The remainder of this unit assumes a perfectly competitive
More information2013 sample MC questions - 90
Class: Date: 2013 sample MC questions - 90 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The price elasticity of demand measures the that results from
More informationDemand and Supply. Economics
Demand and Supply Economics How Do Demand and Price Interact? Demand = What we are willing and able to buy at various prices. Demand is expressed in terms of a time frame: eg. per day or per week. Quantity
More informationDemand - the desire, ability, and willingness to buy a product.
Demand - the desire, ability, and willingness to buy a product. The Law of Demand states that the quantity demanded of a good will be greater at lower prices than will be demanded at higher prices. Thus
More informationChapter 6. Elasticity
Chapter 6 Elasticity Both the elasticity coefficient and the total revenue test for measuring price elasticity of demand are presented in this chapter. The text discusses the major determinants of price
More informationChapter 6 Lecture - Elasticity: The Responsiveness of Demand and Supply
Chapter 6 Lecture - Elasticity: The Responsiveness of Demand and Supply 1 The Price Elasticity of Demand and Its Measurement We define price elasticity of demand and understand how to measure it. Although
More informationLaw of Supply. General Economics
Law of Supply General Economics Supply Willing to Offer to the Market at Various Prices during Period of Time Able to Offer to the Market at Various Prices during Period of Time General Economics: Law
More informationMacro Unit 1b. This is what we call a demand schedule. It is a table that shows how much consumers are willing and able to purchase at various prices.
Macro Unit 1b Demand Market: an institution or mechanism, which brings together buyers ("demanders") and sellers ("suppliers") of particular goods and services. Notice that the remainder of this unit assumes
More informationTo start we will look at the relationship between quantity demanded and price.
University of California, Merced ECO 1-Introduction to Economics Chapter 5 Lecture otes Professor Jason Lee I. Elasticity As we learned in Chapter 4, there is a clear relationship between the quantity
More informationCHAPTER 4: DEMAND. Lesson 3: elasticity of demand
CHAPTER 4: DEMAND Lesson 3: elasticity of demand 3 CASES OF DEMAND ELASTICITY Because quantity demanded depends on its price, economists use a concept called elasticity. Elasticity is a measure of responsiveness
More informationStudy Unit 1. Elasticity SIM University. All rights reserved. Introduction
Study Unit 1 Elasticity Introduction Elasticity of Demand Elasticity and Total Expenditure Income Elasticity of Demand Cross Elasticity of Demand Elasticity of Supply Elasticity of Demand Elasticity of
More informationChapter 4: Demand. Section I: Understanding Demand. Section II: Shifts of the Demand Curve. Section III: Elasticity of Demand
Chapter 4: Demand Section I: Understanding Demand Section II: Shifts of the Demand Curve Section III: Elasticity of Demand Section 1: Understanding Demand LEQ: What is the law of demand? VOCAB: demand
More informationCBSE SAMPLE PAPER-2(solved) ECONOMICS Class XII ANSWERS
CBSE SAMPLE PAPER-2(solved) ECONOMICS Class XII ANSWERS 1. Option C. Why to produce 2. Option A. substitute goods. 3. Option A. Inferior goods. 4. Option A. Parallel to X-axis. 5. Option C. General price
More informationINSTITUTE OF RISING STARS
INSTITUTE OF RISING STARS 1/9,Lalita Park, Main Vikas Marg,Laxmi Nagar Chapter 2 Theory of Demand and Supply 1. Which of the following pairs of goods is an example of substitutes? (a) Tea and sugar (b)
More informationPrice Elasticity of Demand and Supply
CIMA BA1: BA1 Fundamentals of Business Economics Module: 4 Price Elasticity of Demand and Supply 1. Introduction Beth and Sam sell sea food out of a small shop. They noticed that if they put the price
More informationWHAT IS DEMAND? CHAPTER 4.1
Economics Unit 2 TEACHER WHAT IS DEMAND? CHAPTER 4.1 What is demand? THE DESIRE, ABILITY, AND WILLINGNESS TO BUY A PRODUCT. What is microeconomics? THE AREA OF ECONOMICS THAT DEALS WITH BEHAVIOR AND DECISION
More informationPrice Mechanism. Price Demand Price. Quantity demanded. Quantity demanded
Mechanism In market economic system all decisions are taken on the bases of price mechanism. mechanism is based on two invisible hands i.e. demand and supply forces. emand is the amount of goods and services
More informationELASTICITY OF DEMAND AND SUPPLY - MARKETS IN ACTION
WEEK 3 /LECTURE 3 NOTES ELASTICITY OF DEMAND AND SUPPLY - MARKETS IN ACTION Introduction We begin this session by examining elasticity, one of the most important concepts in economics. Let s assume that
More informationDemand - the desire, ability, and willingness to buy a product.
Demand - the desire, ability, and willingness to buy a product. 1. You must have the desire for the product 2. You must be able to make a purchase 3. You must be willing to make a purchase 4. Purchases
More informationWJEC (Eduqas) Economics A-level
WJEC (Eduqas) Economics A-level Microeconomics Topic 2: Demand and Supply in Product Markets 2.4 Price, income and cross price elasticities of demand and supply Notes Price elasticity of demand The price
More informationElasticity and Its Applications
Elasticity and Its Applications 1. In general, elasticity is a. a measure of the competitive nature of a market. b. the friction that develops between buyer and seller in a market. c. a measure of how
More information/
SAMPLE QUESTION PAPER 3 ECONOMICS Class XII Time allowed: 3hrs Maximum Marks: 100 General Instructions: a) All questions are compulsory. b) The question paper comprises of two sections, A and B. You are
More informationFormula: Price of elasticity of demand= Percentage change in quantity demanded Percentage change in price
1 MICRO ECONOMICS~ CHAPTER FOUR CHAPTER FOUR PRICE ELASTICITY OF DEMAND You know that when supply increases, the equilibrium price falls and the equilibrium quantity increases THE PRICE ELASTICITY OF DEMAND~
More informationChapter 2 Market analysis
Chapter 2 Market analysis Market analysis is concerned with collecting and interpreting data about customers and the market so that businesses adopt a relevant marketing strategy. Businesses carry out
More information2013 Pearson. What do you do when the price of gasoline rises?
What do you do when the price of gasoline rises? Elasticities of Demand and Supply 5 When you have completed your study of this chapter, you will be able to 1 Define the price elasticity of demand, and
More informationDemand. Explain what it means to demand a good or service. In an economy, who generally demands goods & services? Demand
Demand Explain what it means to demand a good or service. In an economy, who generally demands goods & services? Demand Explain what it means to demand a good or service. Answer: the willingness & ability
More informationKing Saud University College of business administration Course Specification: Microeconomics (ECON- 101)
King Saud University College of business administration Course Specification: Microeconomics (ECON- 101) Subject Coordinator: Dr. Md. Izhar Alam Instructor: Dr. Md. Izhar Alam Instructor title: Asstt.
More informationEconomic Analysis for Business Decisions Multiple Choice Questions Unit-2: Demand Analysis
Economic Analysis for Business Decisions Multiple Choice Questions Unit-2: Demand Analysis 1. The law of demand states that an increase in the price of a good: a. Increases the supply of that good. b.
More informationChapter 4: Understanding Demand
SCHS SOCIAL STUDIES What you need to know UNIT TWO 1. What a competitive market is and how it is described by the supply and demand model 2. What a supply curve shows 3. The difference between a movement
More informationOverview. Demand Curves 9/3/2014. In chapter 2, we deal with demand and supply analysis in perfectly competitive markets.
Overview In chapter 2, we deal with demand and supply analysis in perfectly competitive markets. Demand and Supply Perfectly competitive markets consist of a large number of buyers and sellers. The transactions
More informationELASTICITY AND ITS APPLICATION
5 ELASTICITY AND ITS APPLICATION Questions for Review 1. If demand is elastic, an increase in price reduces total revenue. With elastic demand, the quantity demanded falls by a greater percentage than
More informationMicroeconomics: Principles, Applications, and Tools
Microeconomics: Principles, Applications, and Tools NINTH EDITION Chapter 5 Elasticity: A Measure of Responsiveness Learning Objectives 5.1 List the determinants of the price elasticity of demand 5.2 Use
More informationSample Paper-05 ( ) Economics Class XII. Time allowed: 3 hours Maximum Marks: 100
Sample Paper-05 (2016-17) Economics Class XII Time allowed: 3 hours Maximum Marks: 100 Answers 1. (b) How to produce. 2. (c) tea and coffee 3. (c) Contraction of demand. 4. PPC shift when (i) resources
More informationEcon: CH 7 Test Review Demand & Supply
Econ: CH 7 Test Review Demand & Supply The Big Idea: 1. Scarcity is the basic economic problem that requires people to make choices about how to use limited resources 2. Buyers and sellers voluntarily
More information9/24/2008. Utility. Utility and Consumer Demand. Law of DMU. Measuring Utility. Income Effect. Scarcity is our lot
Utility Utility and Consumer Demand Ch. 6 We ll come back to Ch. 5 later Something s usefulness Or, the amount of satisfaction you get from an item You can create a monetary value to describe satisfaction
More informationIB Economics/Microeconomics/Elasticities
IB Economics/Microeconomics/Elasticities Contents 1 2.2 Elasticities 1.1 Price Elasticity of Demand (PED) 1.2 Price Elasticity of Supply (PES) 1.3 Income Elasticity of Demand (YED) 1.4 Cross Elasticity
More informationAP Microeconomics Chapter 6 Outline
I. Introduction AP Microeconomics Chapter 6 A. Learning Objectives In this chapter students should learn: 1. What price elasticity of demand is and how it can be applied. 2. The usefulness of the total
More informationQuestion # 1 of 15 ( Start time: 01:24:42 PM ) Total Marks: 1 A person with a diminishing marginal utility of income: Will be risk averse. Will be risk neutral. Will be risk loving. Cannot decide without
More informationUNIT II INDIVIDUAL DEMAND SCHEDULE AND CURVE AND MARKET DEMAND SCHEDULE
DEMAND UNIT II The demand for a commodity is its quantity which consumers are able and willing to buy at various prices during a given period of time. Demand is a function of Price (P), Income (Y), Prices
More informationEcon 303. Weeks 3-4 Consumer Theory
Econ 303 Weeks 3-4 Consumer Theory CHAPTER 3 OUTLINE 3.1 Consumer Preferences 3.2 Budget Constraints 3.3 Consumer Choice 3.4 Revealed Preference 3.5 Marginal Utility and Consumer Choice Consumer Behavior
More informationGoods with many substitutes or luxe goods ( Gucci, yachts) Small change in price = even smaller change in demand
Elasticity Price Elasticity of Demand - The measure of the responsiveness of quantity demanded of a good to a change in price. - PED= %change in QD/ % change Price - If PED > 1 = Elastic Small change in
More informationChapter 2 The Basics of Supply and Demand
Chapter 2 The Basics of Supply and Demand Read Pindyck and Rubinfeld (2013), Chapter 2 Microeconomics, 8 h Edition by R.S. Pindyck and D.L. Rubinfeld Adapted by Chairat Aemkulwat for Econ I: 2900111 Chapter
More informationPolar Cases of Elasticity and Constant Elasticity
Polar Cases of Elasticity and Constant Elasticity By: OpenStaxCollege There are two extreme cases of elasticity: when elasticity equals zero and when it is infinite. A third case is that of constant unitary
More informationChapter 3 Quantitative Demand Analysis
Chapter 3 Quantitative Demand Analysis EX1: Suppose a 10 percent price decrease causes consumers to increase their purchases by 30%. What s the price elasticity? EX2: Suppose the 10 percent decrease in
More informationMIDTERM I. GROUP A Instructions: November 20, 2013
EC101 Sections 03 Fall 2013 NAME: ID #: SECTION: MIDTERM I November 20, 2013 GROUP A Instructions: You have 60 minutes to complete the exam. There will be no extensions. The exam consists of 30 multiple
More informationCHAPTER 4, SECTION 1
DAILY LECTURE CHAPTER 4, SECTION 1 Understanding Demand What Is Demand? Demand is the willingness and ability of buyers to purchase different quantities of a good, at different prices, during a specific
More informationTheRevisionGuide (www.therevisionguide.com) is a free online resource for Economics and Business Studies.
TheRevisionGuide.com Accelerating your potential Economics Revision AS Economics Demand Notes by: Apsara Sumanasiri Student Name : Date:. TheRevisionGuide (www.therevisionguide.com) is a free online resource
More informationChapter 19 Demand and Supply Elasticity
Chapter 19 Demand and Supply Elasticity Learning Objectives After you have studied this chapter, you should be able to 1. define price elasticity of demand, elastic demand, unit elastic demand, inelastic
More informationELASTICITY OF DEMAND. Mr. Cline Economics Marshall High School Unit Two CA
ELASTICITY OF DEMAND Mr. Cline Economics Marshall High School Unit Two CA The Correct Response Is.. Economists describe the ways in which consumers respond to price changes as Elasticity of Demand. Are
More informationLecture 6 Consumer Choice
Lecture 6 Consumer Choice Business 5017 Managerial Economics Kam Yu Fall 2013 Outline 1 Rational Choice Consumption Decisions Market Demand 2 Consumers Responsiveness Price Applications Income Substitutes
More informationBell Ringer. 1. A gallon of gas 2. Big Mac 3. Apple iphone X 4. Car. How much would you be willing to pay for the following items?
Bell Ringer How much would you be willing to pay for the following items? 1. A gallon of gas 2. Big Mac 3. Apple iphone X 4. Car Bell Ringer How much would you be willing to pay for the following items?
More informationMr Sydney Armstrong ECN 1100 Introduction to Microeconomics Lecture Note (4) Price Elasticity of Demand
Mr Sydney Armstrong ECN 1100 Introduction to Microeconomics Lecture Note (4) Price Elasticity of Demand The law of demand tells us that consumers will buy more of a product when its price declines and
More informationLecture - 03 Elasticity of Demand
Economics, Management and Entrepreneurship Prof. Pratap K. J. Mohapatra Department of Industrial Engineering & Management Indian Institute of Technology - Kharagpur Lecture - 03 Elasticity of Demand Good
More informationIntroductory Microeconomics. Dr. Lisa Mohanty TUI University
Introductory Microeconomics Dr. Lisa Mohanty TUI University Supply and Demand Forces that make market economies function Determines the quantity of each good produced Demand and Supply in a competitive
More informationSection 1: Microeconomics Syllabus item: 18 Weight: Elasticity. Price Elasticity of Demand (PED)
Section 1: Microeconomics Syllabus item: 18 Weight: 3 1.2 Elasticity Price Elasticity of Demand (PED) 1. Price Elasticity of Demand and its determinants Elasticity ² Measure of responsiveness. It measures
More informationEconomics: New Ways of Thinking Ancillary Sampler
Economics: New Ways of Thinking Ancillary Sampler Thank you for your interest in EMC Publishing s Economics: New Ways of Thinking! By now you have probably discovered why we were so excited to offer our
More informationInterpreting Price Elasticity of Demand
INTRO Go to page: Go to chapter Bookmarks Printed Page 466 Interpreting Price 9 Behind the 48.2 The Price of Supply 48.3 An Menagerie Producer 49.1 Consumer and the 49.2 Producer and the 50.1 Consumer,
More informationSocial Studies The Effect of Elasticity on Demand and Supply. Outcome 26
Social Studies 1211 The Effect of Elasticity on Demand and Supply Outcome 26 ACTIVITY: Introduction to Elasticity WHAT IS ELASTICITY? We know that change in price can affect quanity demanded or supplied.
More informationChapter 3 Demand and Supply John Petroff (2002)
Chapter 3 Demand and Supply John Petroff (2002) INTRODUCTION The purpose of this lesson is to reach an understanding of how markets operate, how prices are set and transactions occur. The two market forces
More informationAssignment 2 Due on October 25 th (in class) * Please bring your answers in a big gray scantron answer sheet
ECON 202-510 Fall 2007 Raul Ibarra-Ramirez Assignment 2 Due on October 25 th (in class) * Please bring your answers in a big gray scantron answer sheet MULTIPLE CHOICE. Choose the one alternative that
More informationChapter 4: Individual and Market Demand. Chapter : Implications of optimal choice
Econ 203 Chapter 4 page 1 Overview: Chapter 4: Individual and Market Demand Chapter 4 + 5.1-5.3: Implications of optimal choice What happens if changes? What happens to individual demand if a price changes?
More informationECO401 Current Online 85 Quizzes Question Repeated ignore In Green color are doubted one
ECO401 Current Online 85 Quizzes Question Repeated ignore In Green color are doubted one Question # 1 of 15 ( Start time: 01:24:42 PM ) Total Marks: 1 A person with a diminishing marginal utility of income:
More information.the key ideas. Webnote 122
.the key ideas. 1 Webnote 122 yed-income demand xed-cross demand pes-supply ped-demand 4 alternative elasticities Some key points to note for your answerability Webnote 123 2 Yed-income elasticity of demand
More informationECON 120 SAMPLE QUESTIONS
ECON 120 SAMPLE QUESTIONS 1) The price of cotton clothing falls. As a result, 1) A) the demand for cotton clothing decreases. B) the quantity demanded of cotton clothing increases. C) the demand for cotton
More information