PED HW#2

PED HW#2 - parallel). b. that intersect: for two PED line...

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IB Economics Greg Kalai Page 68, 3+6 +*7 3. Examples of goods that are a. Elastic: gum or coffee, because a small increase in the price of either could result in total drop in demand, as there is other brands of the good, substitutes and other factors. b. Inelastic: gas, medicine, because an increase in price would not affect demand all that much because it is necessary for us to have things such as gas and medicine to live our lives and drive our cars (and heat our homes). 6. Relative PED demand curves that a. are parallel to each other: Parallel means that they will never intersect, this means that they are both perfectly inelastic or perfectly elastic (horizontally parallel or vertically
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Unformatted text preview: parallel). b. that intersect: for two PED line representations to intersect, at least of them has to be NOT perfectly inelastic (either 0<PED<1 or 1<PED<∞) . The other one could be perfectly elastic or perfectly inelastic, but as long as they’re not both perfectly elastic or perfectly inelastic, they could intersect. c. If two PED lines do not intersect, they must both parallel to each other. 7. Demand for good X increases as a result of an advertising campaign. D1 shows the demand for good X before the advertising campaign was utilized, and D2 shows the increased demand for X after the ad campaign. The two PED lines show to be parallel to each other in...
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This document was uploaded on 10/26/2011 for the course PLIR 2050 at UVA.

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