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Series 86 Chapter 1 questions and answers verified 2024
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Series 86 Chapter 1 questions and answers verified 2024
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Series 86 Chapter 1Non-price Factors of Demand
The income of buyers
The number of buyers
Preferences (tastes) of buyers
Buyers' expectations regarding future events
Prices of related items
A change in these factors will change the position of the entire curve
Ex. Larger market with more buyers = Move curve out because even though
the prices are the same, their are going to me of all prices sold, due to higher
demand
Non-price Factors of Supply
The number of sellers
The price of raw materials and other resources
Technology
Taxes and subsidies
Sellers' expectations regarding future events
Prices of related items
Main factor of supply elasticity?
,Time
Ed >1 = Elastic
Quantity demanded will change by a LARGER % than the price change
For example, a 1% decline in price might produce a 2% increase in the
quantity demanded
Ex. A price decrease will increase total revenue, since the lower price is more
than offset by the larger percentage change in the quantity demanded.
Likewise, a price increase will decrease total revenue when demand is elastic
Ed <1 = Inelastic
Quantity demanded will change by a LESSER % than the price change
Ex. Price decreases will decrease total revenue while price increases will
increase total revenue
Ed = 1 is called unit elasticity
The percentage change in demand will equal the percentage change in price
Ex. Price changes have no effect on total revenue.
, Elasticity Formula
Shows if a price change will dramatically affect the quantity demanded of that
product
The more the change in price affects demand, the more elastic
Elasticity Example: Finding Demand Change
Elasticity Example: Given a % decrease in price...Find the Increase in
Quantity =
= % change in price / complement % change in price
Elasticity Example: Given a % decrease in price...Find the % increase in sale
to get a % change in Revenue =
=((1 + % change in revenue) - complement % change in price) / complement
% change in price
Short Run
Fixed and variable costs
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