Adobe Ch. 4 Flashcards Preview

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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

law of supply

producers supply more product when price rises and vice versa