# First Term Weekly Test ECONOMICS. ECONOMICS STD 10 (ICSE) Ch. 3. ELASTICITY OF DEMAND

Size: px
Start display at page:

Download "First Term Weekly Test ECONOMICS. ECONOMICS STD 10 (ICSE) Ch. 3. ELASTICITY OF DEMAND"

Transcription

1 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 a change in another variable. For example, when variable X responds to a change in variable Y, variable X is said to be elastic. 2. Define Price Elasticity of demand. Ans. Price elasticity of demand measure the degree of responsiveness of demand for a commodity due to change in its price. Elasticity of demand is the ratio between percentage change in quantity demanded and percentage change in price. % Change in quantity demanded. Ed= % Change in Price Ed= ^ Q X P ^P Q Q= Original demand ^Q= Change in demand P= Original price ^P= Change in price 3. What are the different types/ kinds/ degree of Price Elasticity of demand? Ans. The different types are:- i. Perfectly Elastic demand : When no change or a very small change in price causes an infinite change in quantity demanded of a commodity. ( This type of situation is generally not found in real life) Ed= Price Qty. Rs. demanded ( 1 )

2 ii. Perfectly Inelastic demand: When there is no change in quantity demand in spite of substantial increase or decrease in price. (This type of situation is generally not found in real life) Ed= 0 Price Qty demanded Rs iii. Relatively Elastic Demand: When a percentage change in quantity demand is much greater than percentage change in price. Ed > 1 Generally seen in: Luxury goods When close substitutes available Expenditure on commodity is large Commodity has various uses Price Qty demanded Rs iv. Unit elastic demand. When percentage change in quantity demanded is equal to percentage change in price. The demand curve takes the shape of rectangular hyperbola. Ed=1. eg. If the price increase by 20%; demand decrease by 20% (Rectangular hyperbola is the curve under which all rectangles have equal area.it is a rare phenomenon) Price Rs Qty dd v. Relatively Inelastic demand: When percentage change in quantity demanded is lesser than percentage change in price. A substantial change in prices has little effect on quantity demanded. Generally seen when: Close substitute not available Expenditure on it is very small It is a necessary good When demand is urgent. ( 2 )

3 Ed<1 Price Rs Qty. dd Mention the factors affecting elasticity of demand. 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 a necessity, its demand is inelastic. 3. Proportion of Total expenditure spent: Products that consume a small portion of the consumer s income has inelastic demand. 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 find a substitute for a commodity. On the other hand, in the Short- period because the consumer gets comparative less time to make adjustment, demand becomes relatively less elastic. 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. Thus, its overall demand will fall to a large extent. 6. Possibility of postponement: If the demand for a particular commodity cannot be postponed its demand will be inelastic, Example medicines, food etc. Whereas, commodities like TV set etc. Its demand will fall to a large extent when price rises because it is not an urgent commodity 7. Habits: Those goods which have become habitual necessities for the consumers have low price elasticity. Even if the price rises, the consumer due to his addiction, will not be able to lower his demand. Example. Cigarettes, drugs etc. 8. Price-level: Highly priced goods have low price elasticity or inelastic demand. Example diamonds because the consumer does not react much to change in price Low priced goods have low price elasticity or inelastic demand. Example coarse cloths because the consumer does not react much to change in price Medium-class commodities are more elastic. Example, watches, Cycles etc. because the consumer reacts to change in price. 9. Joint demand They also affect the elasticity of demand. ( 3 )

4 Example. If the demand for pen is inelastic the demand for ink will also be inelastic. 9. Explain the percentage method/proportionate method of elasticity of demand. The elasticity of demand is measured by dividing percentage change in quantity demanded of a product to the percentage change in price. Ed= Percentage change in quantity demanded. Percentage change in price. % Change in quantity demanded. Ed= % Change in Price Ed= ^ Q X P ^P Q Q= Original demand ^Q= Change in demand P= Original price ^P= Change in price IMPORTANCE OF ELASTICITY OF DEMAND. 1. Importance to the producer. Every producer has to decide the price of his product. If the demand for his product is less elastic, he will fix up a higher price in order to earn more profit and if the demand for his product is elastic, he will fix up a lower price. 2. Importance to a finance Minister. The finance minister makes use of this concept while imposing taxes. He often imposes higher taxes on commodities which has less elastic demand and can easily raise revenue. On the other hand commodities with elastic demand may be taxed less. 3. Importance in Factor Pricing. The factor of production for which the demand is less elastic can obtain a higher price as compared to those having elastic demand. Eg., workers producing goods having inelastic demand can easily get their wages raised. 4. Importance in international trade. The concept of elasticity of demand helps in determining the terms of trade between two countries. Eg.,If Bangladesh knows India s demand for jute is inelastic, it can easily increase the price of jute. TYPES OF ELASTICITY OF DEMAND. 1. Price elasticity of demand. Price elasticity of demand is 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 is the degree of responsiveness of demand for a commodity due to change in income. ( 4 )

5 % Change in quantity demanded. Ei= % Change in Income. Ei=^Q Q ^Y Y Q= Original demand ^Q= Change in demand Y= Original income ^Y= 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. ii. 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. iii. 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. Cross elasticity of demand. Cross elasticity of demand is 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 Ec= ^Qx Qx ^Py Py Ex. When there is rise in price of tea demand for coffee will increase. Qx= Original demand for commodity x ^Qx= Change in demand for commodity x Py= Original price of commodity y ^Py= Change in price of commodity y Types of cross elasticity of demand. 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 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. ( 5 )

6 Ex. If price of petrol will go up demand for car will decrease. Zero cross elasticity of demand. Commodities which are not related to each other have zero cross elasticity of demand. Ex. any change in price of milk will not bring any change in the demand for cloth. LAW OF DEMAND Other things being equal, as the price of a good or service rises, its quantity demanded falls and vice versa. The law indicates the direction of change. ELASTICITY OF DEMAND Price elasticity of demand measures the degree of responsiveness Of demand for a commodity due to change in its price Elasticity of demand indicates the magnitude of change ABSOLUTE CHANGES RELATIVE CHANGES Absolute changes in price and quantity are Relative changes do not depend on units of measures in terms of the original units measurement. These changes are expressed in the same units. These are calculated as percentage changes in price and quantity. ( 6 )

### STANDARD XII (ISC) ECONOMICS Chapter 4: Elasticity of Demand

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

### 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

### Q.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

### 07. 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,

### Dr. 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

### Chapter 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

### CONSUMER'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

### 1.2.3 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:

### CHAPTER 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

### J. 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

### David 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

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

### 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.

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

### 2. 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

### CBSE 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

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

### ECONOMICS 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

### The 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

### MULTIPLE 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

### DEMAND 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

### Macro 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

### WJEC (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

### /

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

### DOWNLOAD 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

### DEMAND 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:

### Chapter 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

### 2013 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

### Theory 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

### Chapter 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

### UNIT-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

### Chapter 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

### Study 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

### Formula: 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~

### Econ: 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

### 2007 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

### Introductory 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

### Lesson-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

### CHAPTER 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

### 1. Demand: willingness to buy a good or service and the ability to pay for it; how much of an item an individual is willing to purchase at each price

1. Demand: willingness to buy a good or service and the ability to pay for it; how much of an item an individual is willing to purchase at each price 2. Quantity demanded vs demand: quantity demanded is

### Demand 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

### LEARNING 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

### The 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

### ECON 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

### ECON 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

### Goods 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

### Demand. 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

### Assignment 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

### Sample 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

### Microeconomics: 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

### IB 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

### ELASTICITY 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

### Ch. 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

### Bell 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?

### INSTITUTE 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)

### Sample Midterm 2 questions

Economics 1A, Fall 2012 Gregory Clark Sample Midterm 2 questions 1. In India cheap food is distributed by the government from special stores. Poor people have to wait in long lines to get this food. Will

### Law 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

### Chapter 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

### Unit 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

### Principles of MicroEconomics: Econ102

Principles of MicroEconomics: Econ102 Price Elasticity of Demand: The responsiveness of the quantity demanded to a change in price, measured by dividing the percentage change in the quantity demanded of

### CH 5 sample questions - 80

Class: Date: CH 5 sample questions - 80 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 a.

### Reading Essentials and Study Guide

Lesson 3 Elasticity of Demand ESSENTIAL QUESTION What are the causes for a change in demand? Reading HELPDESK Academic Vocabulary technical related to a particular subject such as art, science, or trade

### .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

### Lecture 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

### Price 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

### Price 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

### AP 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

### Chapter 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

### Section 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

### 2.6 Price elasticity of demand

2.6 Price elasticity of demand Part 1 - PED is a measure of the responsiveness of consumers to a change in the price of a particular good. With data from a demand schedule, we can calculate the PED for

### Chapter 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

### MIDTERM 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

### Economics. Class XII: Sample Paper. Source: mycbseguide.com

Economics Class XII: Sample Paper Source: mycbseguide.com Sample Paper-05 (2016-17) Economics Class XII Time allowed: 3 hours Maximum Marks: 100 General Instructions: (i) All questions in both sections

### TheRevisionGuide (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

### Chapter 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

### WHAT 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

### Elas%city Mr Traynor. Economics Note 5 Leaving Cert 5 th Year. St. Michaels College, Ailesbury Rd

Elas%city Mr Traynor Economics Note 5 Leaving Cert 5 th Year, Ailesbury Rd ELASTICITY When we introduced demand we noeced that consumers usually buy more of a good when its price is low or their income

### Elasticity 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

### SOLUTION SUB: ECONOMICS DURATION 1 HR MARKS 25 SET A

SOLUTION SUB: ECONOMICS DURATION 1 HR MARKS 5 Ans.1. (i) Gossen (ii) Satiety (iii) GIffen (iv) Exceptional (v) Derived or Indirect SET A Ans..(i) Demand Desire Meaning: The demand refers to a desire backed

### Welcome to Day 4. Principles of Microeconomics

Principles of Microeconomics Welcome to Day 4 What we did last class: 1) Law of demand and law of supply. 2) What equilibrium is. 3) Importance of incentives. 4) List of things that moves demand. 5) How

### To 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

### Topic: What are some factors that affect the PRICE of goods and services? 1. If you believe an item is too expensive (not worth the money they are

Topic: What are some factors that affect the PRICE of goods and services? 1. If you believe an item is too expensive (not worth the money they are asking for it) you don t have to buy it. All transactions

### University of Toronto October 17, ECO 100Y INTRODUCTION TO ECONOMICS Midterm Test # 1

Department of Economics Prof. Gustavo Indart University of Toronto October 17, 2008 SOLUTIONS ECO 100Y INTRODUCTION TO ECONOMICS Midterm Test # 1 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The

### 2013 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

### Supply and Demand. Objective 8.04

Supply and Demand Objective 8.04 Supply and Demand Pages 258-259 259 copy bold terms and give a definition or description of each. Page 261 Copy the questions Worksheet A-2A 1. Surplus When the amount

### Homework 2 Answer Key

Econ 226 Principles of Microeconomics Fall, 24 Dr. Kathryn Wilson Due Date: Tuesday, September 28 th Homework 2 Answer Key 1. When the of movie admissions increases from \$7 to \$8, the demanded falls from

### Topic 4c. Elasticity. What is the difference between this. and this? 1 of 23

Topic 4c Elasticity What is the difference between this and this? 1 of 23 Defining and Measuring Elasticity (I) Price elasticity of demand Ø The price elasticity of demand is the ratio of the percent change

### ECON 102 Micro Principles Exercise 2. Multiple Choice Questions. Choose the best answer July 24,2008

1 ECON 102 Micro Principles Exercise 2 Multiple Choice Questions. Choose the best answer July 24,2008 1. When marginal benefit (MB) is greater than marginal cost (MC) A) the economy produces too little

### Mr 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

### Question Paper Business Economics I (MB1B3): January 2009

Question Paper Business Economics I (MB1B3): January 2009 Answer all 78 questions. Marks are indicated against each question. 1. Which of the following is not responsible for an increase in demand for

### INTI COLLEGE MALAYSIA UNIVERSITY FOUNDATION PROGRAMME ECO 185 : BASIC ECONOMICS 1 RESIT EXAMINATION : APRIL 2003 SESSION

ECO 185 (R) / Page 1 of 10 INTI COLLEGE MALAYSIA UNIVERSITY FOUNDATION PROGRAMME ECO 185 : BASIC ECONOMICS 1 RESIT EXAMINATION : APRIL 2003 SESSION Answer ALL questions in SECTION A in the OMR sheet provided

### ELASTICITY 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

### 1. 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

### ASSESSMENT TOPICS. TOPIC 1: Market & Resource Allocation PEC 4123: ECONOMIC ENVIRONMENT FOR BUSINESS 10/13/2016

ASSESSMENT PEC 4123: ECONOMIC ENVIRONMENT FOR BUSINESS Course Work: 60% - Time Constrained Assessment 20% - Case Analysis & Presentation 30% - Participation 10% Examination: 40% TOTAL: 100% TOPICS 1. Markets

### Elasticity. Shape of the Demand Curve

Lecture 4 Elasticity Eric Doviak Principles of Microeconomics Shape of the Demand Curve When prices change, change in quantity demanded depends on shape of demand curve Consumer 1 has a very elastic demand

### ECO 100Y INTRODUCTION TO ECONOMICS Midterm Test # 1

Department of Economics Prof. Gustavo Indart University of Toronto October 17, 2008 ECO 100Y INTRODUCTION TO ECONOMICS Midterm Test # 1 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total time

### INDIAN SCHOOL MUSCAT SENIOR SECTION Department of Commerce and Humanities

INIAN SCHOOL MUSCAT SENIOR SECTION epartment of Commerce and Humanities Class : XII Question Bank SERIES -1 MICRO ECONOMICS ate of issue --------------2017 ECONOMICS (030) Reference: NCERT Text Book ate

### Supply and Demand. Worksheet A-2A 2014

Supply and Demand Worksheet A-2A 2014 Worksheet A-2A 1. Surplus When the amount supplied exceeds the demand 2. Shortage When the amount demanded exceeds the supply 3. Utility The power to satisfy your