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Published in:
2018 | OriginalPaper | Chapter
13. Elasticities
Authors : Martin Kolmar, Magnus Hoffmann
Published in: Workbook for Principles of Microeconomics
Publisher: Springer International Publishing
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Abstract
1.
Elasticities are always independent of the unit of measurement.
2.
The point elasticity and the arc elasticity of a linear demand function are always identical.
3.
The value of the price elasticity of a demand function \(x(p)=\frac{10}{p}\) always equals 10.
4.
The price elasticity of a supply function is influenced by the production functions of the firms supplying in the market.
Market research has measured the following market demand function: \(x(p)=1{,}000-300\,p\). The market supply function is \(y(p)=\alpha+100\,p\), with \(-\frac{1{,}000}{3}<\alpha<1{,}000\).
1.
The price elasticity of demand is constant.
2.
The market demand in equilibrium reacts inelastically to changes in the price
3.
The market supply reacts inelastically to changes in the price if α > 0.
4.
The market supply in equilibrium reacts elastically to changes in the price if α < 0.
Thilo wants to consistently spend half of his income on apparel.
1.
The income elasticity of his demand for apparel is (in absolute terms) 0.5.
2.
The price elasticity of his demand for apparel is 0.
Carl wants to spend a constant percentage of his income on apparel.
3.
The income elasticity of his demand for apparel is (in absolute terms) 0.5.
4.
The price elasticity of his demand for apparel is 0.