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