ECO 251 Unit Test II

ECO 251 Unit Test II - 12:12:00 results 1 Ed=%%changeinprice

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ECO 251-4236 Unit Test II 01/03/2011 12:12:00 Take a look at  table 4  and  recreate the entire table  and then check out your  results Elasticity  measures the strength of buyer’s response to a price change 1) Perecentage Method of Elasticity of Demand Ed= % change in quantity demanded              % change in price Price of Coke drops 2% Quantity Demanded goes down 4% Ed =  4%  =  -2         -2% First question in Aplia  - economists consider only absolute value of elasticity of  demand. (i.e.) We drop the minus sign {take the absolute value} Five types of elasticity of demand 1) Perfectly Inelastic Demand   Ed = 0 2) Inelastic Demand   Ed < 1 3) Unit Elastic Demand   Ed = 1 4) Elastic Demand   Ed > 1 5) Perfectly Elastic Demand   Ed   Infinity Determinants of Elasticity of Demand 1) Necessities and Luxuries 2) Availability of close substitute 3) Type of Market Structure
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4) Time Horizon Midpoint Method of Elasticity Total Revenue and Elasticity of Demand     Total Revenue = Price x Quantity sold $5 x 100 = $500 (P x Q) 1) Total Revenue and Inelastic Demand When demand is inelastic, Price and Total Revenue move in the same       direction. 2) Total Revenue and Unit Elastic Demand When demand is Unit Elastic, whatever the change in the price, Total       Revenue remains unchanged. 3) Total Revenue and Elastic Demand When demand is elastic, Total Revenue and Price move in the opposite       direction. When  Look up the Unit Two study guide and start studying and adding relevant       data to them now Ey = Income Elasticity  Income Elasticity of Demand   measures the strength of buyer’s response to an  Income Change 
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% Change in Quantity Demanded         Q1= Intital Wantity Demanded % Change in Income              Q2= New Quantity Demanded                                                      Y1= Initial Income                                                      Y2= New Income Y= Income I= Investment R= Interest Rate M= Imports Income Elasticity of Demand      positive elasticity of demand
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ECO 251 Unit Test II - 12:12:00 results 1 Ed=%%changeinprice

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