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elasticities (1)

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8 views

elasticities (1)

This is a requrement for this class it was done by hand

Uploaded by

kbreeding25
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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AP Microeconomics Page 1 of 2

Assignment: Apply Concepts of All Elasticities


1. Elasticity
Price elasticity of demand measures how much a
A. Define price elasticity of demand. (5 points) product's consumption changes in response to price
changes.
The quantitative relationship between the amount of
B. Define price elasticity of supply. (5 points) commodity supplies and its corresponding price is
measured by the price elasticity of the supply.
C. Define income elasticity of demand. (5 points)
the responsiveness of the quantity demanded for
a good to change in income is measured by the
D. Define cross price elasticity of demand. (5 points)
term income elasticity of demand.
Demand cross price elasticity quantifies the variation in demand for one good caused by a change in the price
of another good.
2. Price Elasticity of Demand

A. If demand is elastic, total revenue falls when ___________.


price increases (2 points)

B. If demand is inelastic, is the demand curve flat or steep? (2 points) steep

C. If demand is inelastic, the numerical value of elasticity is __________.


less than 1
(2 points)

D. If demand is elastic, are there many or few substitutes available for the good?
(2 points) many

E. If demand is elastic, do consumers have little or lots of time to respond to a


price change? (2 points) lots

F. If demand is inelastic, is the money consumers spend on the good a large or


small part of their monthly budget? (2 points) small

3. Price Elasticity of Supply

A. If supply is elastic, is the supply curve flat or steep? (2 points) flat

B. If supply is inelastic, do suppliers have little or lots of time to respond to a


price change? (2 points) little

C. If supply is inelastic, are the production inputs easy or difficult to use in


production of other goods? (2 points) difficult

D. If supply is elastic, the numerical value of elasticity is __________.


greater than (2 points)

4. It may be helpful to use graphs to answer the following questions. You won't be graded
on your graphs, however.

A. If the price of watermelons fell only a little bit when the supply of watermelons
increased a lot, what could you conclude about the elasticity of demand for
watermelons? (4 points) That the demand for watermelons is comparatively inelastic if the price of
watermelons only slightly decreased when the supply of watermelons increased
significally.
B. If the price of bottled water increased a lot when the demand for bottled water
increased a little bit, what could you conclude about the elasticity of supply of
bottled water? (4 points) That the supply of bottled water is reasonably elastic if the price of bottled
water rose significantly when the demand for bottled water increased
____________
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AP Microeconomics Page 2 of 2
Assignment: Apply Concepts of All Elasticities

5. When you find cross-price elasticity of demand, you can determine whether the
goods are substitutes or complements based on whether your answer is a
positive or negative number. Explain. Include definitions of substitutes and
complements in your explanation. (6 points) Goods that serve as substitutions have rising demand when the price of
the original good rises. Since there is a direct relationship, the number is
positive. When the price of one good rises, the demand for the
complimentary good declines.
6. When you find income elasticity of demand, you can determine whether the
goods are normal or inferior based on whether your answer is a positive or
negative number. Explain. Include definitions of inferior and normal goods in
your explanation. (6 points)

____________
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