Ch 6 Part 2 Flashcards
1
Q
Income elasticity of demand
A
The ratio of a percentage change in quantity demanded to a percentage change in consumers’ income
Income elasticity = ΔQd / ΔI x I/ Qd
2
Q
Ei for inferior good
A
Ei < 0
3
Q
Ei for normal good
A
Ei > 0
4
Q
Price elasticity of supply
A
Measured the responsiveness of producers to price changes
Price elasticity of supply = ΔQs / ΔP x P/Qs
5
Q
Price elasticity is infinity when…….
A
A significant change in quantity supplied as a result of such a small change in its own price
6
Q
Price elasticity of supply is zero when……..
A
An insignificant or no change in quantity supplied as a result of a change in its own price
7
Q
Factors determining price elasticity of supply
A
Substitution & production costs
Time
