question
Elasticity
answer
measures how much one variable responds to changes in another variable.
question
Elasticity
answer
is a numerical measure of the responsiveness of Qd or Qs to one of its determinants.
question
Price elasticity of demand
answer
measures how much Qd responds to a change in P.
question
Price Elasticity of Demand formula
answer
Percentage change in Qd / Percentage change in P
question
midpoint method formula
answer
end value - start value / midpoint x 100%
question
midpoint
answer
is the number halfway between the start & end values, also the average of those values.
question
Price elasticity is higher
answer
when close substitutes are available.
question
Price elasticity is higher
answer
for narrowly defined goods than broadly defined ones.
question
Price elasticity is higher
answer
for luxuries than for necessities.
question
Price elasticity is higher
answer
in the long run than the short run.
question
time horizon
answer
elasticity is higher in the long run than the short run
question
elasticity
answer
Economists classify demand curves according to their?
question
slope of the demand curve
answer
The price elasticity of demand is closely related to the?
question
Rule of thumb
answer
The flatter the curve, the bigger the elasticity. The steeper the curve, the smaller the elasticity.
question
flatter the curve
answer
bigger the elasticity
question
steeper the curve
answer
smaller the elasticity
question
Perfectly inelastic demand
answer
D curve: vertical ; Consumers' price sensitivity: 0 ; Elasticity: 0
question
Inelastic demand
answer
D curve: relatively steep ; Consumers' price sensitivity: relatively low ; Elasticity: < 1
question
Unit elastic demand
answer
D curve: intermediate slope ; Consumers' price sensitivity: intermediate ; Elasticity: 1
question
Elastic demand
answer
D curve: relatively flat ; Consumers' price sensitivity: relatively high ; Elasticity: > 1
question
Perfectly elastic demand
answer
D curve: horizontal ; Consumers' price sensitivity: extreme ; Elasticity: infinity
question
slope of a linear demand curve
answer
is constant, but its elasticity is not.
question
Revenue
answer
Price x Quantity = ?
question
Higher Price
answer
means more revenue on each unit you sell
question
sell fewer units (lower Q)
answer
due to Law of Demand.
question
Demand is elastic
answer
a price increase causes revenue to fall.
question
Demand is inelastic
answer
a price increase causes revenue to rise.
question
Price elasticity of supply
answer
measures how much Qs responds a change in P.
question
Perfectly inelastic
answer
S curve: vertical ; Sellers' price sensitivity: 0 ; Elasticity: 0
question
Inelastic
answer
S curve: relatively steep ; Sellers' price sensitivity: relatively low ; Elasticity: < 1
question
Unit elastic
answer
S curve: intermediate slope ; Sellers' price sensitivity: intermediate ; Elasticity: 1
question
Elastic
answer
S curve: relatively flat ; Sellers' price sensitivity: relatively high ; Elasticity: > 1
question
Perfectly elastic
answer
S curve: horizontal ; Sellers' price sensitivity: extreme ; Elasticity: infinity
question
supply is inelastic
answer
an increase in demand has a bigger impact on price than on quantity.
question
supply is elastic
answer
an increase in demand has a bigger impact on quantity than on price.
question
Supply becomes less elastic
answer
as Q rises due to сapacity limits.
question
income elasticity of demand
answer
measures the response of Qd to a change in consumer income.
question
Income elasticity of demand formula
answer
Percent change in Qd / Percent change in income
question
normal good
answer
An increase in income causes an increase in demand for a?
question
normal goods
answer
income elasticity > 0.
question
inferior goods
answer
income elasticity < 0.
question
cross-price elasticity of demand
answer
measures the response of demand for one good to changes in the price of another good.
question
cross-price elasticity of demand formula
answer
% change in Qd for good 1 / % change in price of good 2
question
substitutes
answer
cross-price elasticity > 0
question
complements
answer
cross-price elasticity < 0
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
