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Flashcards in Chapter 4 Deck (2)
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1
Q

What is price elasticity of demand?

A

is % change in q demanded/ % change in price

Demand is inelastic if less than 1; elastic of greater than 1.

2
Q

What is income elasticity of demand?

A

measures responsiveness of demand to changes in income.

Income elastic if greater than 1; income inelastic if less than 1.

Goods whose income elasticity is positive are normal goods, negative inferior goods.