Econ- Exam 2 Pointers

Econ- Exam 2 Pointers - Subject: Principles of...

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Subject: Principles of Microeconomics Topic: Exam 2 Pointers When consumers face rising gasoline prices, they typically reduce their quantity demanded more in the long-run than the short-run. Janet enjoys Pepsi so much she has to consume it every day, and she enjoys gourmet cheese but only consumes it sporadically. If the prices of both goods increase, her consumption of Pepsi does not increase, but her consumption of gourmet cheese decreases drastically. This is because to Janet, Pepsi is a necessity, and gourmet cheese is a luxury good. If the price elasticity of a good is 0.4, then a 10% increase in price results in a 4% decrease in quantity demanded. The more responsive to a change in price consumers are, the flatter the demand curve. A perfectly elastic demand implies that any rise in price represented by the demand curve will result in a consumption of zero. The price elasticity of supply measures how much the quantity supplied of a good responds to a change in the price of that good.
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This note was uploaded on 10/17/2011 for the course ECON 2023 taught by Professor Unknown during the Fall '05 term at Arkansas.

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Econ- Exam 2 Pointers - Subject: Principles of...

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