Chapter 7A Elasticity Flashcards
1
Q
Price Elasticity of Demand equation
A
(%change in Quantity demanded / % change in price)
2
Q
Ranges of elasticity
A
Elastic when elasticity is greater than 1
Inelastic when elasticity is less than 1
Unit elastic when elasticity = 1
3
Q
How to calculate percentage change
A
(the change / the average) x 100
4
Q
Determinants of price elasticity of demand
A
availability of substitutes (more subs, more elastic)
Proportion of income spent (larger proportion, more elastic)
Time (more time, more elastic)
5
Q
Elasticity in relation to revenue
A
when demand is inelastic, revenue follows change in price
When demand is elastic, revenue follows change in quantity
6
Q
Cross price elasticity
A
%Change in Quantity demanded of X/ % Change in Price of Y
Elasticity is > 0: substitutes
Elasticity is
