ECO 201 Exam 2 UKY Questions
and Answers 100% Pass
price elasticity of demand. (Ed) - ✔✔a measure that indicates the degree of consumer
response to a price change
calculate price elasticity of demand - ✔✔% change in Quantity / % change in Price
midpoint elasticity formula - ✔✔
interpreting Ed - ✔✔I Ed I > 1 demand is elastic
I Ed I < 1 demand is inelastic
I Ed I = 1 demand is unitary elastic
perfectly elastic demand - ✔✔Ed = 0
ex: insulin
perfectly inelastic demand - ✔✔Ed = infinite
Determinants of Price Elasticity of Demand - ✔✔-Availability of Substitutes (as # of
available subs rises demand becomes more elastic, no subs for insulin, lots of brands of
chips)
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,-Luxury or Necessity (the more good is a necessity, rather than a luxury, the more
inelastic demand will be, milk buy with out looking at price, buy cookies when cheep,
brand can effect this)
-Time Horizon (the more time buyers have to adjust to a price change the elastic the
demand for a good becomes. day later-> less elastic, month later -> more elastic, year
later -> even more elastic. gas goes up = car pool. prices stay up= buy a more efficient
car. )
-Definition of Market (the more specific the classification for a good the more elastic the
demand is. Starbucks coffee = less elastic than coffee in general)
the relationship between elasticity of demand and total revenue - ✔✔TR = (price) x
(quantity)
law of demand = as the price changes the effect on total revenue depends upon the
elasticity of demand
total expenditures - ✔✔total revenue
TR = (price) x (quantity)
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, multi- tiered pricing system - ✔✔producers charge different groups of consumers
different prices
price discrimination - ✔✔charging different people different prices for the same good or
service based on differing elasticity of demand for different groups of consumers (ladies
night, Amazon prime, movie theaters)
elasticity of supply - ✔✔measures producers' response to a price change. when the
prices changes. how flexible are producers? always gonna be a positive number.
Es= (%change in quantity supplied) / (% change in price)
price elasticity of supply - graphically - ✔✔Es > 0 = as price goes up, quantity supplied
goes up
Es > 1 then elastic supply
Es < 1 then inelastic supply
Es = 1 then unit/unitary elastic supply
Determinants of Price Elasticity of Supply - ✔✔Factors that determine flexility of
producers' response to a price change
-Ease of acquiring and utilizing inputs, factors mobility (if the factor os productions can
be easily moved from one use to another it will affect elasticity of supply. the higher the
mobility of factors the greater the greater the elasticity of supply of the good.)
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 3
and Answers 100% Pass
price elasticity of demand. (Ed) - ✔✔a measure that indicates the degree of consumer
response to a price change
calculate price elasticity of demand - ✔✔% change in Quantity / % change in Price
midpoint elasticity formula - ✔✔
interpreting Ed - ✔✔I Ed I > 1 demand is elastic
I Ed I < 1 demand is inelastic
I Ed I = 1 demand is unitary elastic
perfectly elastic demand - ✔✔Ed = 0
ex: insulin
perfectly inelastic demand - ✔✔Ed = infinite
Determinants of Price Elasticity of Demand - ✔✔-Availability of Substitutes (as # of
available subs rises demand becomes more elastic, no subs for insulin, lots of brands of
chips)
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
,-Luxury or Necessity (the more good is a necessity, rather than a luxury, the more
inelastic demand will be, milk buy with out looking at price, buy cookies when cheep,
brand can effect this)
-Time Horizon (the more time buyers have to adjust to a price change the elastic the
demand for a good becomes. day later-> less elastic, month later -> more elastic, year
later -> even more elastic. gas goes up = car pool. prices stay up= buy a more efficient
car. )
-Definition of Market (the more specific the classification for a good the more elastic the
demand is. Starbucks coffee = less elastic than coffee in general)
the relationship between elasticity of demand and total revenue - ✔✔TR = (price) x
(quantity)
law of demand = as the price changes the effect on total revenue depends upon the
elasticity of demand
total expenditures - ✔✔total revenue
TR = (price) x (quantity)
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
, multi- tiered pricing system - ✔✔producers charge different groups of consumers
different prices
price discrimination - ✔✔charging different people different prices for the same good or
service based on differing elasticity of demand for different groups of consumers (ladies
night, Amazon prime, movie theaters)
elasticity of supply - ✔✔measures producers' response to a price change. when the
prices changes. how flexible are producers? always gonna be a positive number.
Es= (%change in quantity supplied) / (% change in price)
price elasticity of supply - graphically - ✔✔Es > 0 = as price goes up, quantity supplied
goes up
Es > 1 then elastic supply
Es < 1 then inelastic supply
Es = 1 then unit/unitary elastic supply
Determinants of Price Elasticity of Supply - ✔✔Factors that determine flexility of
producers' response to a price change
-Ease of acquiring and utilizing inputs, factors mobility (if the factor os productions can
be easily moved from one use to another it will affect elasticity of supply. the higher the
mobility of factors the greater the greater the elasticity of supply of the good.)
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 3
