Learning Objectives By the end of this section, you will be able to: When news reports indicate that “the economy grew 1.2% in the first quarter,” the reports are referring to the percentage change in real GDP. By convention, governments…
Learning Objectives By the end of this section, you will be able to: When examining economic statistics, there is a crucial distinction worth emphasizing. The distinction is between nominal and real measurements, which refer to whether or not inflation has…
Learning Objectives By the end of this section, you will be able to: Macroeconomics is an empirical subject, so the first step toward understanding it is to measure the economy. How large is the U.S. economy? Economists typically measure the…
Figure 6.1 The Great Depression At times, such as when many people having trouble making ends meet, it is easy to tell how the economy is doing. This photograph shows people lined up during the Great Depression, waiting for relief checks. At other…
5.1 Price Elasticity of Demand and Price Elasticity of Supply Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price. We compute it as the percentage change in quantity demanded (or…
Learning Objectives By the end of this section, you will be able to: The basic idea of elasticity—how a percentage change in one variable causes a percentage change in another variable—does not just apply to the responsiveness of quantity supplied…
Learning Objectives By the end of this section, you will be able to: Studying elasticities is useful for a number of reasons, pricing being most important. Let’s explore how elasticity relates to revenue and pricing, both in the long and…
Learning Objectives By the end of this section, you will be able to: There are two extreme cases of elasticity: when elasticity equals zero and when it is infinite. A third case of interest is that of constant unitary elasticity.…
Learning Objectives By the end of this section, you will be able to: Both the demand and supply curve show the relationship between price and the number of units demanded or supplied. Price elasticity is the ratio between the percentage change in…
Figure 5.1 On-Demand Media Pricing Many on-demand Internet streaming media providers, such as Netflix, have introduced tiered pricing for levels of access to services, begging the question, how will these prices affect buyer’s purchasing choices? (Credit: modification of “160906_FF_CreditCardAgreements” by kdiwavvou/Flickr, Public Domain)…