Micro 5

2. Microeconomics

3. Opening
Prayer

4. Quizmaster
10 questions
4 answers
email to
mckytee@go.byuh.edu
1 Extra Credit Point

5. Complements
goods or services
that are
used together

6. Complements

8. Substitutes
goods or services
that can be used for
the same purpose

10. Normal Good
Demand increases
as income rises and
decreases as income falls

11. Inferior Good
Demand decreases
as income rises and
increases as income falls

13. Microeconomics
Chapter 5
Elasticity

14. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Movement along the
Demand Curve
Price changes
demand curve does
not change
quantity demanded
changes

15. 0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Shift in the Demand Curve
Price does not
change
demand curve
shifts
quantity demanded
changes

16. Movement or Shift?
Variable Change Movement Shift
Price
Income
Related Goods
Tastes
Population and Demographics
Expectations

17. elasticity
price elasticity of demand
total revenue
total expenditure
income elasticity of demand
cross-price elasticity of demand
price elasticity of supply
Key Terms

18. ELASTICITY EQUATION BENCHMARK
Price
Demand
Cross-
Price
Income
Price
Supply
MPF
Inelastic | Elastic
1
Compliments | Substitutes
0
Inferior | Normal | Luxury
0 1
Inelastic | Elastic
1
%∆QD
%∆QD1
%∆P
%∆P2
%∆QD
%∆I
%∆QS
%∆P
∆Q
∆P
Q
P
x

21. Elasticity
If I change one thing does
another thing also change?

22. Elasticity
A measure of how much
one economic variable
responds
to changes in
another economic variable

24. Price Elasticity of Demand
%
%
QD
P
Percentage Change in Quantity
Demanded
Percentage Change in Price

25. Price Quantity Total Revenue
90 1 90
80 2 160
70 3 210
60 4 240
50 5 250
40 6 240
30 7 210
20 8 160
10 9 90
Demand
Schedule
Total Revenue
Curve
0
52
104
156
208
260
10 20 30 40 50 60 70 80 90
Total
Revenue
Price Per Pizza

26. Percentage Change
%
New - Old
Old
Ignore units in the scale

27. Price Elasticity of Demand
1
Elastic
Inelastic
<1 >1
1. Calculate Elasticity
2.Take AbsoluteValue
3. Compare to benchmark of 1

28. $0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price
%∆QD
%∆P
(4-5)÷5
(6-3)÷3
-.2
1
.2

29. $0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
%∆QD
%∆P
(3-5)÷5
(4-3)÷3
-.4
.33
1.2
Price Increase

30. $0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
%∆QD
%∆P
(5-3)÷3
(3-4)÷4
.66
-.25
2.67
Price Decrease

31. Midpoint
Formula

32. $0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
%∆QD
%∆P
(3-5)÷5
(4-3)÷3
-.4
.33
1.2
Price Increase

33. $0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
%∆QD
%∆P
(5-3)÷3
(3-4)÷4
+66%
-25%
2.67
Price Decrease

34. Midpoint Formula
Delta Q
over
Q Bar
Delta P
over
P Bar
Q
Q
P
P
Trick: Flip denominator and multiply

35. $0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Ice Cream
Price
7
4
1.75
Midpoint Formula
∆Q
Q ∆P
P
x
2
4 1
3.5
x

36. $0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
1 2 3 4 5 6 7 8 9 10
Gallons - Gasoline
Price

37. $0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
$100.00
3 4.5 6
Gallons - Gasoline
Price

38. Scales can be deceptive