Flashcards in Adobe Ch. 4 Deck (51)
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1
Law of Demand
consumers will buy more of a product when price decliens and vice versa
2
elastic
modest price change causes substantial change in quantity
3
inelastic
substantial price c change cause modest change in quantity
4
price elasticity for demand for good x
cahnge in qty dem of x/(sum of new and old demand qty/2))/change in price of x/(sum of new and old prices/2))
5
elastic demand is always
negative, but think in absolute value
6
elastic demnd
demand is price elastic if speicific percent cahange in price reslts in larger percent change- Ed greater than 1
7
inelastic demand
demand is price inelastic iff speciic percent change in price results in smaller percent
8
unit elastic demand
demand is unit elastic if percent change in price results in same percent change in q demanded
9
perfectly inelastic demand
price change results in no change in q demand- rare- demand curve is vertical, zero qty response facing price change
10
perfelc elastic demand
demand curve faced by price taking firm a
11
elasticity of demnd
measures responsiveness of q demanded to change in produt price
12
larger Ed
more people respond to price
13
smaller Ed
less people respond to price
14
Ed less than one
not much reaction - insensitive, demnad inelastic
15
Total revenue is
P x Q
16
Ed greater than one
demand elastic, larger/more people respond to price
17
Ed quals one
change in demand equals in change in price
18
price discrimination
charging price sensitive customers less and price insenstiive customers more
19
elastic demand, what happesn to price, qty and total rev
drops, raises, raise revenu
20
inelastic demand, what happens to price, qty, and total rev
rise, drop, raise revenue
21
total revenue test- elastic drop in price equals what in total rev
rise
22
inelastic drop in price equals
rise in total rev
23
unit elasticity drop in price equals what
total revenue unchanged
24
demand is what when price is high
elastic
25
determinants of price elasticity of demand
substainability, budget share, luxuries v necessities, time
26
substainability
larger number of substitute goods availbabel equals greater price elasticity of demand
27
budget share
increase price of product relative to one income greater price elasticity of demand for it
28
luxuries v necesities
demand for luxurious goods tends to be more elastic than demand for necessities
29
time
demand for product is more elastic the longer the time period under consideration- habit formation, product durability
30
