Elasticity Vocab

|14. |The prices of potatos and tomatos vary, but the prices of loafs of bread remain fairly constant. | |

Thus a sales reduction of 33.33% percent at initial price of $10 is equivalent to losses brought about by a price reduction of 1.5.

3. The price elasticity of demand increases with the length of the period considered simply because ( )

28. Holding all else constant, an increase in the price of hot dogs would cause:

Law of Supply: Price and quantity has a direct relation, when price increases, quantity also increases. When the price of oranges increases, farmers

The demand of gasoline has increased steadily over the last twenty years. In 1981 the U.S. averaged 6.5 million barrels of gasoline consumption per day. By comparison, in 2004 the U.S. averaged 9.2 million barrels of gasoline consumption per day. For most of this time period, gas prices stayed relatively the same. This is because the U.S. refineries increased their production to meet the demand and maintain the equilibrium price. Also during this same time period worldwide demand for crude oil increased 27%. Crude oil producers also increased their production to meet the demand keeping prices the same.

In the questions example, Spring had low demand and a higher price of $5.50 per pound and Summer had high demand and a lower price of $4.00 per pound.

Elasticity of demand is measured as the percentage change in quantity demand divided by the percentage change in price .

$24, down 39% from a year earlier and 60% from its all-time high of $60 in August 2000. With

1) I thought that the price of a good changed from the quantity that was available. Would you explain why it is the opposite?

2. The quantity of peanuts supplied increased from 40 tons per week to 60 tons per week when the price of peanuts increased from $4 per ton to
$5 per ton. The price elasticity of supply for peanuts over this price range is

c. Suppose the price is currently $2. Will this price result in a shortage or a surplus? How much is the shortage or

Elasticity is a measure of the responsiveness of demand to changes in the price of a good or service. In the case of Steam Scot, when the price rises from 4 to 5, demand falls from 60,000 to 40,000 units. The original equilibrium market price of 4 pounds resulted in demand of 60,000 units and this generated revenue of 240,000 pounds. When the prices increased to 5 pounds the resulting demand is 40,000 units, and this generates total revenue of 200,000 pounds. When market price changes from 4 pounds to 5 pounds 40,000 pounds of revenue are lost in this indicates an elastic price elasticity of demand.

4. Assume that all the factors affecting demand in this model remain the same, but that the price has changed. Further assume that the price changes are 100, 200, 300, 400, 500, 600 dollars.

When the price of a good rises the quality demanded falls, if we think about how much does it falls. To figure out by how much it falls we must calculate the price elasticity of demand which is calculate by how responsive demand is to rise in price. Also, the price elasticity of supply measures the responsiveness of quantity supplied to a change in price.