Chapter 4: Elasticity Flashcards Preview

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Flashcards in Chapter 4: Elasticity Deck (14):
1

price elasticity of demand

a units-free measure of responsiveness of the quantity demanded of a good to a change in its price when all other influences on buyers plans remain the same.

2

perfectly inelastic demand

elasticity equal 0.
demand curve is vertical.

3

inelastic demand

when the elasticity is less than 1 and greater than 0

4

unit elastic demand

when the elasticity equals 1

5

elastic demand

when the elasticity is greater than 1 and less than infinity.

6

perfectly elastic demand

elasticity equals infinity
demand curve is horizontal.

7

total revenue

equals the price of the good multiplied by the quantity sold.
PxQ

8

total revenue test

estimates the price elasticity of demand by noting how a change in price affects the total revenue.

9

income elasticity of demand

measures the responsiveness of the demand for a good to a change in income, other things remaining the same.

10

cross elasticity of demand

measures the responsiveness of demand for a good to change in the price of a substitute or complement, other things remaining the same.

11

elasticity of supply

measures the responsiveness of the quantity supplied to a change in its price when all other influences on selling plans remain the same.

12

momentary supply

shows the immediate response to a price change.

13

short-run supply

shows how the quantity supplied responds to a change in price after some of the possible adjustments have been made.

14

long-run supply

shows the response of the quantity supplied to a price change after all possible adjustments have been made.