In the case of public goods (and services), it is impossible to divide the produ
ID: 1163971 • Letter: I
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In the case of public goods (and services), it is impossible to divide the product into individual saleable units for consumers to purchase and, additionally, the exclusion principle doesn't apply. That is, even if would take advantage of their purchase. People could receive the benefits without paying for the product. they may desire the good or service. These are public goods and services and their provisic the product could be sold, consumers would not want to purchase it because "(r_" In such cases, there is no incentive for individuals to purchase the item on their own even though made possible through government purchases where tax revenues can be used to provide the product. Questions for Chapter 6 begin here 11. (3 pts) What is the main difference between the law of demand and the price elasticity of demand? The law of demand tells you that quantity demanded will increase as price falls, or conversely, that quantity demanded will decrease as price rises. So, it tells you the " d changes in quantity demanded caused by the price changes. As such, the law of demand says there is a(n) ( direct, inverse) relationship between price and quantity demanded. )" quantity ) of a change in By contrast, the price elasticity of demand tells you " (h demanded changes when price changes. It shows the (r quantity demanded to a change in price. Demand elasticity measures the (s of demanders to changes in the price of a good, whereas supply elasticity measures the sensitivity of suppliers to changes in the price of a product. 12. (3 pts) How do you interpret the coeficient of the price elasticity of demand? Explain when E is 1.5, 0.7, and 1.0. The interpretation is based on the elasticity formula. The formula has the percentage change in quantity demanded in the ( numerator, denominator) and the percentage change in price in the ( numerator, denominator) a) A coefficient of 1.0 indicates that demand is ( clastic inelastic, unit elastic) because the percentage change in quantity demanded is the same as the percentage change in price. b) A coefficient of 0.7 indicates that demand is (elastic, inelastic, unit elastic) because the percentage change in quantity demanded is less than the percentage change in price c) A coefficient of 1.5 indicates that demand is (elastic, inelaste unit elastic) because the percentage change in quantity demanded (the numerator) is greater than the percentage change in price (the denominator). Here, you can expect a (small, large, same ) change in quantity purchased for given price change. That is, consumers are relatively (responsive unresponsive) to price changes if the coefficient of elasticity of demand is greater than 1 would each be graphed? Correctly name the demand illustrated on the graphs below. percentage change in price. So the elasticity of demand is ( line at the level of quantity demanded change in quantity demanded. So the elasticity of demand is ( 13.(4 pts) What is the meaning of perfeetly inelastic demand and perfeetly elastic demand? How a) Perfectly inelastic demand indicates that there is no change in quantity demanded for a ) in this case. The graph, with price on the vertical axis and quantity on the horizontal axis, would be a ( horizontal, vertical ) b) Perfectly elastic demand indicates that a very small change in price results in a zero to infinite in this case. The graph would be a ( horizontal, vertical) line across quantity at one price level D (Perfectly ( elastic, inelastic)) P D (Perfectly (elastic, inelastic)Explanation / Answer
1) .. consumers would not want to purxhase it beacuse of "Free Riding" problem because even if they purchase they cannot have full ownership to it as the public goods are non excludable.
2) So, it tells you the "Degree" of changes in quantity demanded caused by price change.
3) Law of demand says there is "inverse relationship" between price and quantity demanded.
4) Price elasticity of demand tells you "How Much" quantity demanded changes ...
5) IT shows the "repsonsiveness" of change in ...
6) Demand elasticity measures the "sensivity" ..
7) percentage change in quanity demanded in "numerator" and percentage change in price iin "denominator".
8) 1.0 indicates that demand is "unit elastic".
9) 0.7 "inelastic".
10) 1.5 "elastic".
11) Here you can expect a "large" change in quantity demanded..
12) Consumers are relatively "responsive"..
13) perfectly inelastic demand: Elasticity of demand is "Zero". would be a "vertical line".
14) perfectly elastic demand: Elasticity of demand is "infinity". would be a "horizontal line".
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