Flashcards in Ch 9 Deck (20):
What is the law of demand?
Other things equal, consumers purchase more of a product when the price declines and less when it's price increase.
How the responsiveness of consumer to price change is measured?
By product's price elasticity of demand.
Demand is elastic if?
Demand is inelastic if?
Demand is unit elastic if?
Total revenue formula?
Price X Quantity = Total Revenue
If demand is elastic
If demand is inelastic
P- will -TR
If demand is unit elastic
P- or P+ wouldn't change TR
Immediate Market Period?
It is a period of time which producers can not respond to a change in price with a change in quantity supplied.
Short run in Microeconomics
Period of time too short to change plant capacity, but long enough to use the fixed-sized plant more or less intensively.
Long run in Microeconomics
Time period long enough for firms to adjust their plant sizes and for new firms to enter the market.
Cross elasticity of demand
Measures how sensitive consumer purchases of one product (X) are to a change in the price of some other product (Y).
More Income = More Demand / Positive
More income = Less Demand / Negative
Responsiveness of quantity demanded to change in price.
Quantity in demanded in Perfectly Inelastic Demand
Not effected by a price change.
Determinants of Price Elastic
More good substitutes like; Luxuries, large portions of income, and large time frame.
Determinants of Price Inelastic
Fewer good substitutes like; Necessities, small portions of income, and shorter time frame.