Ch. 4 Econ Flashcards
(43 cards)
Types of elasticity
Elastic Perfect elastic Inelastic Perfect Inelastic Unit elastic
What does price elasticity look at?
How much does demand changes when prices changes
What happens to demand when a product is elastic
Demand changes inversely to price
Revenue
Quantity demanded times price
Profit
Money left over after expenses are paid
Does elastic or Inelastic have a coefficient of more than 1?
Elastic
Examples of products with elastic demand
Luxuries, anything with a substitute
Do business owners want to sell elastic products?
No
In a perfect elastic, an almost zero percent change in price causes what to supply?
Very large increase
In Inelastic products, when the price goes up what happens to demand?
It barely changes
What happens to revenue if prices of Inelastic products go up?
Revenue goes up
Does elastic or Inelastic have a coefficient of less than 1?
Inelastic
In a perfect Inelastic what happens to demand when you raise prices?
Demand will change almost none
Unit elastic
Change in quantity demanded equals the percentage change in price. Coefficient of 1
What are the four things that determine elasticity (PAIT)
Proportion of income spent on good
Availability of close substitutes
Importance of the good
Time
What is the good if it uses a large proportion of your income
Elastic
If substitutes are available what is it?
Elastic
If you can delay the purchase what is it?
Elastic
Elasticity of supply
The ability to change supply when demand changes
What does elasticity of supply depend on?
How easily a product is made
In elastic supply, a small increase in price causes what for output
Relatively large increase in output
In Inelastic supply, how much does supply change if there is a change in price
Hardly any
Why can’t producers change Inelastic supply
They are either unwilling or unable to
Are companies able to increase supply if they want to on Inelastic supplies
No
