ECON 503: Chapter 3 Quantitative Demand Analysis Dr. Fida Karam Gulf University for Science and Technology Department of Economics and Finance Office N1-115 email: karam.f@gust.edu.kw Dr. Fida Karam (GUST) Quantitative Demand Analysis 1 / 19 Introduction The shapes of demand and supply curves influence how much shifts in demand or supply affect market equilibrium. • Shape is best summarized by elasticity. • Elasticity indicates how responsive one variable is to a change in another
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concept of price elasticity of demand and its calculation. The price elasticity of demand measures the responsiveness of quantity demanded to changes in price; it is calculated by dividing the percentage change in quantity demanded by the percentage change in price. 2. Explain what it means for demand to be price inelastic‚ unit price elastic‚ price elastic‚ perfectly price inelastic‚ and perfectly price elastic. Demand is price inelastic if the absolute value of the price elasticity
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4rth largest Truck manufacturer‚ launched the cheapest car in the world ‚ TATA NANO. At the time of inception ‚ the estimated purchase price for consumers was Rs.100‚000(Indian) but a few years down the line ‚ the prices of raw materials increased by 23% and the car price raised substantially. However the fixed prices in India are as follows; PRICE Base Model Rs.135151 TATA NANO CX Rs.164481 TATA NANO LX Rs.181498 MARKET SEGMENTATION: Tata Nano
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the midpoint method‚ if the price of an airline ticket from Orlando to Pittsburgh falls from $275 to $238‚ the percentage change in price is a. 1442 percent. b. 14.42 percent. c. 15.54 percent. d. 13.45 percent. e. 68.00 percent. 2. When the percentage change in the quantity demanded equals the percentage change in price‚ then demand is a. inelastic. b. unit elastic. c. elastic. d. irrelevant. e. undefined. 3. Which of the following statements is correct? a. The demand for New Balance shoes is more
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Course/Yr/Section: ________________ Score: ____________ I. IDENTIFICATION Identify the terms being defined and afterwards‚ write the term on the space provided opposite each number. ________________ 1. the varying reactions of the buyers to changes in price of goods and services ________________ 2. a curve which shows different combinations of two goods which yield the same level of satisfaction ________________ 3. It determines the allocation of goods and services among the members of society
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CHAPTER 6| Elasticity: The Responsiveness of Demand and Supply SOLUTIONS TO END-OF-CHAPTER EXERCISES Answers to Thinking Critically Questions 1. Even if the overall demand for gasoline is inelastic‚ a revenue increase for Joe’s Gas-and-Go will occur only if the percentage increase in price is greater than the percentage decrease in quantity demanded. If Joe’s price increase is too large and Joe has other competitors who do not raise their prices‚ then it is possible that the percentage
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c) Given that Price = 5‚ Wage rate = 2‚ Labor employed = 10(per month)‚ quantity sold = 100 (per month)‚ rent of Capital = 1 & Capital employed = 5 (per month). i) Calculate Accounting profit per month. ii) Assume that instead of the previous business‚ you could also have taught economics classes and earned 100 $ a month. What would your economic profit be? 2) Define: i) Price elasticity of demand ii) Price elasticity of Supply. b) Suppose that decreasing the price of a pen from 10
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Econ Answers Chapter 3 The price of train travel increases by 10% and the demand for train travel falls by 12.5%. The price elasticity of demand for train travel is – -1.25 The short run (retail) supply of freshly cut flowers is much less elastic than that of pot plants because: -florists cannot keep freshly cut flowers as long as pot plants If demand drops to zero at the slightest increase in price‚ demand is: - Perfectly elastic Price elasticity of supply will be greater when: - firms hold large
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determined by a. multiplying the price of a product by the product. b. measuring the elasticity of a quantity demanded. c. dividing the price of the product by demand. d. dividing the demand for the product by its price. ____ 2. The relationship between the change in price and total revenue for an elastic demand curve is a. variable. c. inverse. b. unit elastic. d. direct. ____ 3. All of the following are determinants of demand elasticity EXCEPT a. whether the purchase of
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companies control the entire market. These firms are in a highly concentrated industry. Oligopolies can result from various forms of collusion which reduce competition and lead to higher costs for consumers. Once a company in an oligopoly changes price or strategy both profit and other companies are impacted. In other words‚ the companies in this industry will change at the same time‚ especially facing a challenge. In their current market position‚ Kodak retains the highest market share. Kodak receives
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