Exam (elaborations)
AGEC 217 Test 1
- Course
- Institution
Exam of 4 pages for the course AGEC 217 at AGEC 217 (AGEC 217 Test 1)
[Show more]
Content preview
AGEC 217 Test 1Ch. 5 Elasticity - -
- Elasticity - --the measure of the sensitivity of one variable to a change in
another variable
- Elastic portion of a curve - --flatter, quantity is more responsive to a
change in price
- Inelastic portion of a curve - --steeper, quantity is less responsive to a
change in price
- Own Price Elasticity (OPE) - --how the quantity of good x changes when
the price of good x is changed
-has heavy revenue implications
-follows the law of demand
Definition - %ΔQx/%ΔPx
Point Formula - (ΔQx/ΔPx)(Px/Qx)
Arc Formula - (ΔQx/ΔPx)(APx/AQx)
Calculus - (dQx/dPx)(Px/Qx)
I OPE I > 1, elastic, lower prices
I OPE I = 1, unit elastic
I OPE I < 1, inelastic, raise prices
- Determinants of OPE - --Substitutes: the more subs a good has, the more
elastic it is
-Degree of luxury and necessity: luxuries are more elastic b/c more subs
exist and they aren't needed, and necessities are more inelastic because a
price change won't really affect demand
-Time period: elasticity tends to be higher in the long run b/c more subs
become available over time
- Cross Price Elasticity (CPE) - --how the quantity of good x changes when
the price of good y changes
-determines whether goods are compliments, independent, or substitutes
Definition - %ΔQx/%ΔPy
Point Formula - (ΔQx/ΔPy)(Py/Qx)
Arc Formula - (ΔQx/ΔPy)(APy/AQx)
Calculus - (dQx/dPy)(Py/Qx)
CPE > 0, substitutes
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Nursephil2023. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $8.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
85169 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now