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Microeconomics > Chapter 7 > Flashcards

Chapter 7 Flashcards

1
Q

What is elasticity?

A

Elasticity measures the sensitivity

The greater the elasticity, the greater the responsiveness.

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2
Q

What is price elasticity of demand?

A

Price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price

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3
Q

What is elastic?

A

Demand is elastic if the percentage change in quantity is greater than the percentage change in price

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4
Q

What is inelastic?

A

Demand is inelastic if the percentage change in quantity is less than the percentage change in price

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5
Q

What is price elasticity of supply?

A

Price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price

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6
Q

When is a price elastic?

A

Supply is elastic if the percentage change in quantity is greater than the percentage change in price

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7
Q

When is a price inelastic?

A

Supply is inelastic if the percentage change in quantity is less than the percentage change in price

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8
Q

What makes supply or demand more or less elastic?

A

Substitution

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9
Q

what affects substitutes?

A

The time period being considered

The degree to which a good is a luxury

The market definition

The importance of the good in one’s budget

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10
Q

what is the instantaneous period?

A

The instantaneous period where supply is fixed and is perfectly inelastic

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11
Q

What is the short run?

A

The short run where some substitution is possible and supply is somewhat elastic

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12
Q

What is the long run?

A

The long run where significant substitution is possible and supply is most elastic

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13
Q

When does price discrimination occur?

A

Price discrimination occurs when a firm separates the people with less elastic demand from those with more elastic demand

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14
Q

What is income elasticity of demand?

A

Income elasticity of demand measures the responsiveness of demand to changes in income

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15
Q

What is a normal good?

A

Normal goods are those whose consumption increases with an increase in income

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16
Q

What is an inferior good?

A

Inferior goods are those whose consumption decreases with an increase in income

17
Q

What is a cross-price elasticity of demand?

A

Cross–price elasticity of demand measures the responsiveness

18
Q

What are substitutes?

A

Substitutes are goods that can be used in place of another

19
Q

What are complements?

A

Complements are goods that are used conjunction with other goods

Microeconomics (13 decks)

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