Explanation Given information: The statement “If elasticity, E, is such that 0 ≤ E < 1 then demand is elastic.” The sensitivity of demand to changes in price varies with the product. For example, a change in the price of light bulbs may not affect the demand for light bulbs much, because people need light bulbs no matter what their price. However, a change in the price of a particular make of car may have a significant effect on the demand for that car, because people can switch to another make. Elasticity of Demand: We want to find a way to measure this sensitivity of demand to price changes. Our measure should work for products as diverse as light bulbs and cars. The prices of these two items are so different that it makes little sense to talk about absolute changes in price: Changing the price of light bulbs by $1 is a substantial change, whereas changing the price of a car by $1 is not. Instead, we use the percent change in price. How, for example, does a 1% increase in price affect the demand for the product? Let Δ p denotes the change in the price p of a product and Δ q denote the corresponding change in quantity q demanded. The percent change in price is Δ p p and the percent change in quantity demanded is Δ q q . We assume in this book that Δ p and Δ q have opposite signs (because increasing the price usually decreases the quantity demanded). Then the effect of a price change on demand is measured by the absolute value of the ratio. | P e r c e n t c h a n g e i n d e m a n d P e r c e n t c h a n g e i n p r i c e | = | Δ q / q Δ p / p

6th Edition

ISBN: 9781119275565

Author: Hughes-Hallett

Publisher: WILEY

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Differential Equations

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APPLIED CALCULUS-PRINT COMPANION (LL)

Ch. 4.1 - Prob. 1P Ch. 4.1 - Prob. 2P Ch. 4.1 - Prob. 3P Ch. 4.1 - Prob. 4P Ch. 4.1 - Prob. 5P Ch. 4.1 - Prob. 6P Ch. 4.1 - Prob. 7P Ch. 4.1 - Prob. 8P Ch. 4.1 - Prob. 9P Ch. 4.1 - Prob. 10P

Ch. 4.1 - Prob. 11P Ch. 4.1 - Prob. 12P Ch. 4.1 - Prob. 13P Ch. 4.1 - Prob. 14P Ch. 4.1 - Prob. 15P Ch. 4.1 - Prob. 16P Ch. 4.1 - Prob. 17P Ch. 4.1 - Prob. 18P Ch. 4.1 - Prob. 19P Ch. 4.1 - Prob. 20P Ch. 4.1 - Prob. 21P Ch. 4.1 - Prob. 22P Ch. 4.1 - Prob. 23P Ch. 4.1 - Prob. 24P Ch. 4.1 - Prob. 25P Ch. 4.1 - Prob. 26P Ch. 4.1 - Prob. 27P Ch. 4.1 - Prob. 28P Ch. 4.1 - Prob. 29P Ch. 4.1 - Prob. 30P Ch. 4.1 - Prob. 31P Ch. 4.1 - Prob. 32P Ch. 4.1 - Prob. 33P Ch. 4.1 - Prob. 34P Ch. 4.1 - Prob. 35P Ch. 4.1 - Prob. 36P Ch. 4.1 - Prob. 37P Ch. 4.1 - Prob. 38P Ch. 4.1 - Prob. 39P Ch. 4.1 - Prob. 40P Ch. 4.1 - Prob. 41P Ch. 4.1 - Prob. 42P Ch. 4.1 - Prob. 43P Ch. 4.1 - Prob. 44P Ch. 4.1 - Prob. 45P Ch. 4.1 - Prob. 46P Ch. 4.1 - Prob. 47P Ch. 4.1 - Prob. 48P Ch. 4.1 - Prob. 49P Ch. 4.1 - Prob. 50P Ch. 4.1 - Prob. 51P Ch. 4.1 - Prob. 52P Ch. 4.1 - Prob. 53P Ch. 4.1 - Prob. 54P Ch. 4.1 - Prob. 55P Ch. 4.1 - Prob. 56P Ch. 4.1 - Prob. 57P Ch. 4.1 - Prob. 58P Ch. 4.2 - Prob. 1P Ch. 4.2 - Prob. 2P Ch. 4.2 - 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To indicate: Whether the statement is true or false.

Solution Summary: The author explains the sensitivity of demand to changes in price varies with the product.