Elasticity L3 Flashcards
(8 cards)
1
Q
Exogenous Event
A
Occurs is some events shifts D or S
2
Q
Endogenous Event
A
The subsequent change in equilibrium caused by the exogenous event
3
Q
If PED is…
A
Greater than 1: Demand is inelastic
Equal to 1: Unitary elastic
Less than 1: Demand is elastic
4
Q
Determinants of PED
A
- Close substitutes: positive correlation
- Necessities vs. Luxuries: higher for luxuries
- Narrow markets: positive correlation
- Time period: positive correlation (LR)
5
Q
Income Elasticity of Demand
A
% change in quantity demanded/% change in income
6
Q
Cross-Price Elasticity of Demand
A
% change in quantity demanded of good 1/% change in Price of good 2
7
Q
PES
A
Greater than 1: elastic
Equal to 1: Unitary elastic
Less than 1: inelastic
8
Q
Determinants of PES
A
- Time period: positive correlation
- Ability for supplier to change price
