Chapter Five Elasticity Of Demand Flashcards Preview

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Flashcards in Chapter Five Elasticity Of Demand Deck (10):
1

What happens when the elasticity of demand is elastic

The quantity demanded response significantly to a change in price

2

What does it mean when the elasticity of demand is inelastic

The quantity demanded response only slightly to changes in price

3

What influences the elasticity of demand

1. Time horizon
2. Definition of the market
3. Necessity versus luxury
4. Availability of close substitutes

4

How does the definition of the market impact the elasticity of demand

It depends on how we draw the boundaries of the market we can have
1. Nearly defined markets or
2. Broadly defined markets

5

How does nearly defined markets affect elasticity of demand

They usually have more elastic demand
- because they're easier to find close substitutes for narrowly defined goods i.e. ice cream

6

What would be an example of a broadly defined market

I.e. food

Vanilla ice cream

7

How elastic would the demand for a necessity be

Tends to have an inelastic demand

8

How elastic of the demand what a luxury item be

It tends to be elastic greater than one

9

How does the availability of close substitutes affect elasticity of demand

If they're close substitutes they tend to have more elastic demand because it is easier for consumers to switch from one good to others

10

What is price elasticity of demand

It measures how much the quantity demanded response to a change in price