Question

1. Explain the difference between price elasticity of demand and income elasticity of demand. 2. If demand is elastic, how will an increase in price change total revenue?

Answer #1

1. Price elasticity of demand is defined as the change in quantity demanded for a change in price of a good. Income elasticity of demand is defined as the change in quantity demanded for a change in Income. So, price elasticity is response of a good for change in price while income elasticity is response for a change in income

2. For an elastic demand good, people would purchase more for a reduced price and purchase less for an increased price. So the total revenue would get reduced for an increased price.

The difference between price elasticity of demand and income
elasticity of demand is that
A. income elasticity of demand examines how an individual's
income changes when prices change and the price elasticity of
demand examines how quantity demand changes when price changes.
B. income elasticity measures the responsiveness of income to
changes in supply while price elasticity of demand measures the
responsiveness of demand to a change in price.
C. income elasticity refers to a horizontal shift of the demand...

1. What is the numerical value for the price elasticity of
demand if a price change causes no change in quantity
demanded?________ What is the numerical value for elasticity of
demand if a price change causes no change in total revenue?________
What is the elasticity of demand for a horizontal demand
curve?________ What is the elasticity of demand if a price increase
leads to an increase in total revenue? elastic /
inelastic. What is the numerical value for the elasticity...

Categories of Price Elasticity of Demand
For each of the following values for price elasticity of demand,
indicate whether demand is elastic, inelastic, perfectly elastic,
perfectly inelastic, or unit elastic. Also, indicate (increase,
decrease, no effect) what would happen to total revenue if a firm
raised the price in each elasticity range.
Price Elasticity of Demand
equals
Descriptionn of Elasticity
Total Revenue Change
-2.5
-1.0
-0.8
-infinity
0

• The price elasticity of demand is |-2|
• The income elasticity of demand is -1.5
• The cross-price elasticity of demand between your good and a
related good is -3.5
a. Describe what would happen to total revenue for your good if
you raised your price by 10 %
b. Describe what would happen to total revenue for your good if
a recession lowered incomes by 10%
c. Describe what would happen to total revenue for your good if...

1. When elasticity of demand is equal to one and the change in
the quantity demanded and the change in price are exactly
proportional. This type of elasticity is described as ________.
A. elastic
B. inelastic
C. unitary elastic
2. What happens to total revenue (TR) if the price rises on a
product with demand that is price elastic?
A. Total revenue will rise.
B. Total revenue will remain the same.
C. Total revenue will fall.

Price elasticity of demand is an important concept. With
appropriate examples, explain how this concept is related to total
revenue. (Hint: When providing example, select a product whose
demand may be relatively elastic; therefore, lowering its price may
lead to increase in total revenue. This will allow other students
to choose a different example.)

Drawing on the influences (determinants) of price elasticity of
demand, explaining whether the demand for petrol in Australia is
elastic or inelastic. Illustrate the effect of price drop on the
total revenue of a petrol station.
Part 1: explain whether demand for petrol is elastic or
inelastic by exploring the determinants of price elasticity of
demand.
Part 2: explain and illustrate the impact of price rise on total
revenue of a petrol station. You may draw a graph.

Drawing on the influences (determinants) of price elasticity of
demand, explaining whether the demand for petrol in Australia is
elastic or inelastic. draw a graph of the effect of price drop on
the total revenue of a petrol station.
Part 1: explain whether demand for petrol is elastic or
inelastic by exploring the determinants of price elasticity of
demand.
Part 2: explain and illustrate the impact of price rise on total
revenue of a petrol station. draw a graph.

(a) Find the elasticity of the demand function
p2 + 2p + q = 81
at
p = 8.
(b) How will a price increase affect total revenue?
Since the demand is elastic, an increase in price will decrease
the total revenue.
Since the demand is unitary, there will be no change in the
revenue with a price increase.
Since the demand is inelastic, an
increase in price will increase the total revenue.
Since the demand is elastic, an increase...

Q16 - If the price elasticity of demand is 1,
demand is
1. Upward sloping.
2. Inelastic
3. Unitary elastic.
Q17 - When wages increase the income effect of
labor supply ________ the quantity of labor supplied because
________.
1. Reduces; the price of leisure has increased.
2. Reduces; workers acquire more of all normal goods when income
increases.
3. Increases; the value of working has increased.
4. Increases; the price of leisure has increased.
4. Elastic.

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