19 terms

Price-Elasticity Coefficient and Formula

Economists measure the degree to which demand is price elastic or inelastic with the coefficient EsubD defined as:

EsubD = Percentage change in quantity demanded of product X/(Over)/Percentage change in price of product X

EsubD = Percentage change in quantity demanded of product X/(Over)/Percentage change in price of product X

How is a buyer's responsiveness to price changes measured?

A buyer's responsiveness to price changes is measured by the price elasticity of demand coefficient.

True or False: The midpoint formula for calculating elasticity multiplies two prices and two quantities for computing percentage changes.

False

The change in quantity, divided by the average of quantity one and quantity two, divided by the change in price divided by the average of price one and price two is known as the ____ formula or approach for the price elasticity of demand.

Midpoint

True or False: The midpoint formula averages the two prices and the two quantities as the reference points for computing the price elasticity of demand.

True

Suppose the price of a handbag is reduced from 100.00 to 90.00. The quantity demanded increases from 50 to 60 unites. The price elasticity of demand for handbags in this price range is

Elastic

Which type of price elasticity of demand is occurring when a substantial price change causes only a small change in the amount purchased of that product?

Price inelastic demand

When demand is relatively price ____, the coefficient for the price elasticity of demand will be less than one.

Inelastic

When the price elasticity of demand is _____ ______, a change in price causes no change in the quantity demanded.

Perfectly inelastic.

When demand is unit elastic, the percentage change in quantity demanded _____ the percentage change in price.

Is equal to

A _____ product has a coefficient of zero

Perfectly inelastic

A product that exhibits perfectly elastic demand has a price elasticity coefficient equal to

Infinity.

When a small change in price causes quantity demanded to increase from zero to all that buyers can obtain, the price elasticity of demand is considered:

Perfectly elastic

A product that is perfectly inelastic has a coefficient equal to

Zero

Identify the two inferior goods below

Hamburger; Bus ticket from LA to New York

_____ _____ is the amount the seller receives from selling a product during some period of time.

Total revenue

Total revenue is calculated by _____ the product price by the quantity sold.

Multiplying.

The percentage change in quantity demanded divided by the percentage change in income is the formula for the;

Income elasticity of demand

If two goods are substitutes, the cross elasticity of demand will be.

Positive