Ch 5 - Elasticity: A Measure of Response Flashcards Preview

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Flashcards in Ch 5 - Elasticity: A Measure of Response Deck (14):
1

What is elasticity?

The ratio of the percentage change in a dependent variable to a percentage change in an independent variable.

2

What is the price elasticity of demand for a good or service?

It is e sub D, the percentage change in quantity demanded of a particular good or service divided by the percentage change in the price of that good or service, all other things unchanged.

3

The measure of elasticity, which is based on percentage changes relative to the average value of each variable between two points, is called...

Arc elasticity

4

If the absolute value of the price elasticity of demand is greater than 1, demand is termed...

Price elastic

5

If the value of price elasticity of demand is equal to 1, demand is termed...

Unit price elastic

6

If the absolute value of the price elasticity of demand is les than 1, demand is termed...

Price inelastic

7

Under what condition is the demand curve said to be perfectly inelastic?

Quantity consumed does not change as price changes.

8

What is the income elasticity of demand.

The percentage change in quantity demanded at a specific price divided by the percentage change in income that produced the demand change.

9

What is cross price elasticity of demand?

The responsiveness of demand for a good or service to a change in the price of another good or service.

10

The price elasticity of supply is...

The ration of the percentage change in qty supplied of a good or service to the percentage change in its price, all other things unchanged.

11

A positive income elasticity tells us that a good is (Normal/inferior)

Normal

12

A negative income elasticity tells us that a good is (Normal/inferior)

Inferior

13

A positive cross price elasticity tells us that two goods are (substitutes/complements)

Substitutes

14

A positive cross price elasticity tells us that two goods are (substitutes/complements)

Complements