Reading Guide: Section 9  Module 46
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AP Economics Class Period *
Read this...you'll have to in college.
Pre-Reading
What do I already think I know?
Why do consumers decrease their quantity demanded when price increases?
Do consumers have the same price sensitivity to ALL goods?
1 point
Clear selection
Rank the following goods in terms of how sensitive consumers would be to a price change for the item.
Extremely sensitive to price changes
Sensitive to price changes
A little sensitive to price changes
Not very sensitive to price changes
Eggs
Beef
Gasoline
Foreign Travel
Clear selection
Explaining why the Law of Demand is a law...
1.  Explain how the substitution effect takes into account opportunity cost for the explanation of the inverse relationship of price and quantity demanded. *
The Income Effect
2.  Describe how the income effect is NOT an increase in a person's income but the EFFECT of an increase in income. *
3.  How does the explanation of the income effect support the substitution effect? *
4.  Why would a business be interested in price elasticity of demand for their goods and services that they sell? *
5.  Calculate the change from $21 to $20?  Take the percent change in quantity demanded and divide by the percentage change in price. *
This will explain HOW to calculate.
6.  Look at the steps and your answer.  How should you calculate the % change? Where does the $1 come from in the solution above? *
7.  With demand the price and quantity demanded have an inverse or negative relationship.  Why do economists drop the negative sign when referring to price elasticity? *
The Midpoint Method
8.  Why is the midpoint method the best method for calculating elasticity? *
9.  Refer to 46-5 above:  What is the price elasticity of a change in Price from $10 to $9 and quantity demanded changing from 50 to 60? *
1 point
10.  If an elasticity is GREATER than 1 (the % change in quantity is larger than the % change in price) the good is deemed to be ELASTIC. If it is less than 1 it is inelastic.  If I was selling a product why would I want to know this (IMPORTANT). *
Estimating Elasticities
11.  Why does foreign travel and eggs have such different price elasticities? *
Why would you NOT watch this?!?!?
12.  I did watch it (Mr. Clifford) *
1 point
What questions would you like answered for class? *
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