Determinants Of The Price Elasticity Of Demand Consider Some

Determinants Of The Price Elasticity Of Demandconsider Some Determ

Consider some determinants of the price elasticity of demand: A good with many close substitutes is likely to have relatively (elastic, inelastic) demand, because consumers can easily choose to purchase one of the close substitutes if the price of the good rises. Is it elastic or inelastic? A good’s price elasticity of demand depends in part on how necessary it is relative to other goods. If the following goods are priced approximately the same, which one has the least elastic demand? · Yacht · Chemotherapy for cancer patients Price elasticity for a good depends on the share of a consumer's budget spent on a good. Other things being equal, which of the following goods has the most elastic demand? · Computer · Laundry detergent · Salt The price elasticity of demand for a good also depends on how you define the good. Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and which will have demand that falls in between. The price elasticity of demand is also affected by the given time period, sometimes called the time horizon. Other things being equal, the demand for natural gas will tend to be (less, more, no less nor more) elastic in the short run than in the long run. What is the Correct answer from the underlined options?

1-Central Pacific/Southern Pacific’s state charter said that the line from San Francisco to the Colorado River needed to run A-along the coast to San Diego. B-through Oregon and on to the source of the Colorado River. C-through the San Joaquin Valley. D-through the Sierra Nevada

2-In the many federal court cases involving Mussel Slough property, the courts A-refused to issue definitive rulings. B-ruled in favor of the squatters. C-ruled in favor of the railroad. D-gave conflicting rulings that favored neither the railroad nor the squatters.

3-The railroad’s initial assessment of Mussel Slough squatters’ property values were A-the same as what settlers would pay for government land. B-comparable with values of similar property in the area. C-grossly deflated. D-grossly inflated.

4-Prior to the Mussel Slough gun fight, the San Francisco Chronicle A-refused to cover the land rights conflict. B-was owned by the Big Four of the Southern Pacific. C-provided strong support to the squatters. D-provided strong support to the railroads.

5-The settlers and land speculators who occupied and claimed the controversial land in Mussel Slough did so largely because A-they were able to purchase deeds to the property that gave them clear legal ownership. B-it was not clear if the Southern Pacific Railroad would actually gain legal title to those lands. C-they were encouraged to do so by laws passed by the United States Congress D-it seemed obvious that neither the government nor private parties owned the land.

6-Mussel Slough is located in the A-San Joaquin Valley. B-Sacramento Valley. C-Salinas Valley. D-Scott Valley.

7-When it came to the Mussel Slough problem, the railroad leaders A-were in good agreement about how to proceed. B-made quick and firm decisions. C-had strong disagreements about the best course of action. D-refused to deal with the issue until the summer of 1880.

8-After the 1880 gun battle in Mussel Slough A-most squatters were forcibly evicted. B-the Supreme Court ruled in favor of the squatters. C-most squatters settled with the railroad. D-federal troops occupied the region.

9-The most important source of the Mussel Slough conflict was the federal government’s granting railroad companies A-the right to offer its property for sale at different prices. B-the right to sue property owners in federal court. C-the ability to lay track in relatively straight lines. D-ownership of alternating sections of land along rail lines.

3- Elasticity and total revenue The following graph shows the daily demand curve for bippitybops in San Francisco. Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve. You will use this information to answer the questions that follow. Note : You will not be graded on any changes made to this graph. Hint : Select the green rectangle after you have placed it on the graph to see its area. On the following graph, use the green point (triangle symbol) to plot the daily total revenue when the market price is $30, $45, $60, $75, $90, $105, and $120 per bippitybop. The price elasticity of demand between points A and B on the initial graph is approximately ( 0, 0.6, 1.67, 75.02). Suppose the price of bippitybops is currently $120 per bippitybop, shown as point A on the initial graph. Because the price elasticity of demand between points A and B is ( elastic, inelastic, unit elastic). , a $15-per-bippitybop decrease in price will lead to ( decrease, increase, no change ) in total revenue per day. In general, in order for a price increase to cause a decrease in total revenue, demand must be ( elastic, inelastic, unit elastic). What are the correct answers from the underlined options? 2 .

Elastic, inelastic, and unit-elastic demand The following graph shows the demand for a good. For each region on the graph given in the following table, use the elasticity formula to identify whether the demand for this good is elastic, (approximately) unit elastic, or inelastic. True or False: The value of the price elasticity of demand is not equal to the slope of the demand curve. · True · False 1 . Determining the price elasticity of demand The following graph shows two known points (X and Y) on a demand curve for grapes The price elasticity of demand for grapes between point X and point Y is approximately ( 0.02, 0.05, 0.37, 2.67). Which suggests that the demand for grapes is ( elastic, inelastic) between points X and Y. What are the correct answers from the underlined numbers?

Sample Paper For Above instruction

Understanding the determinants of price elasticity of demand is fundamental in economic theory and practical market analysis. Price elasticity measures how much the quantity demanded of a good responds to a change in its price. Several key factors influence this responsiveness, including the availability of substitutes, the necessity of the good, the proportion of income spent on the good, the definition of the good, and the time horizon over which demand is assessed.

Firstly, the presence of many close substitutes significantly affects demand elasticity. Goods with numerous substitutes tend to have more elastic demand because consumers can easily switch to alternative products when prices rise. For example, if the price of a particular brand of cereal increases, consumers may switch to a different brand with similar quality. Conversely, goods without close substitutes, such as lifesaving medications or essential commodities, generally have inelastic demand because consumers cannot easily find alternatives. A chemotherapy drug, for example, has highly inelastic demand as patients require it regardless of price changes.

The necessity of a good relative to other goods is another determinant. Necessities tend to have inelastic demand, whereas luxury or non-essential goods tend to have more elastic demand. When goods like yachts, considered luxury items, have the same price, their demand tends to be more elastic compared to essential goods like chemotherapy, which has inelastic demand even at similar prices.

The share of a consumer's budget spent on a good also influences elasticity. Items that constitute a small portion of the budget, such as salt, usually have inelastic demand because price changes do not significantly impact overall expenditure. In contrast, goods like computers, which represent a larger share of a consumer’s budget, display more elastic demand since price variations can greatly affect purchasing decisions.

Moreover, the definition or scope of the good impacts elasticity. Broader definitions tend to be more elastic because the substitution possibilities are greater within a category, whereas narrowly defined goods are less elastic. For example, demand for specific brands versus general categories such as laundry detergent or salt varies in elasticity.

The time horizon is also critical. Demand for natural gas, for example, tends to be more elastic in the long run because consumers and industries have more time to adjust their consumption or switch to alternatives when prices change. In the short run, demand tends to be less elastic because adjustments are more difficult and slower to implement.

Turning now to specific cases, the demand for a good with many substitutes is highly elastic due to ease of switching. An example is a certain brand of cereal, where consumers can readily switch brands if prices rise. Essential medicines like chemotherapy drugs are relatively inelastic because the demand remains steady regardless of price changes.

When analyzing how total revenue responds to price changes, understanding elasticity is vital. If demand is elastic, a price decrease leads to an increase in total revenue because the percentage increase in quantity demanded outweighs the percentage decrease in price. Conversely, if demand is inelastic, a price increase increases total revenue, while a price decrease reduces it. In the unit elastic case, total revenue remains constant regardless of price changes.

Furthermore, the elasticity measurement distinguishes regions of the demand curve. An inelastic region indicates that consumers are less responsive to price changes, whereas elastic regions show high sensitivity. The key insight is that the value of the price elasticity of demand does not equal the slope of the demand curve; instead, elasticity is a ratio of percentage changes that varies along the curve.

Finally, empirical calculations often involve selecting points on known demand curves. For example, the elasticity of demand for grapes between two points can be calculated using the elasticity formula, resulting in a value that indicates whether demand is elastic or inelastic between those points. Typically, elasticity values greater than 1 suggest elastic demand, while those less than 1 suggest inelastic demand.

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