Chapter 6: Elasticity

Question 1

Price Elasticity

Answer 1

How changes in price effect the elasticity of demand

Question 2

Price Elasticity Formula

Answer 2

% change in Q demanded / % change in price

Question 3

Demand is ALWAYS what?

Answer 3

greater than zero

Question 4

% change in quantity

Answer 4

2 / quantity

Question 5

% change in quantity demanded

Answer 5

Change in Q / Average Q

Question 6

Average Quantity

Answer 6

q1 + q2 / 2

Question 7

Percentage Change in P

Answer 7

change in price / average price

Question 8

If elasticity is greater than 1, demand will be what?

Answer 8

Elastic, having a large response to price changes

Question 9

How does a price hike greater than 1 affect total revenue?

Answer 9

It reduces total revenue

Question 10

If elasticity is less than 1, demand is what?

Answer 10

Inelastic, and is not affected by price changes

Question 11

How does a price hike less than one affect total revenue?

Answer 11

Total Revenue is increased

Question 12

If elasticity is equal to 1, demand is what?

Answer 12

Unitary elastic, changes to demand equally affect changes in price

Question 13

How does a price hike equal to 1 affect total revenue?

Answer 13

Total Revenue is not affected

Question 14

Cross - Price Elasticity

Answer 14

the way that changes in the price of one good can affect the quantity demanded of another good

Question 15

Substitute good (Accounting)

Answer 15

When price of good x declines, demand for good y increases

Question 16

Complementary goods (Accounting)

Answer 16

When price of good x rises, demand for good y falls