Supply And Demand Flashcards
When is a product not a commodity
When the seller cares a lot about the variety of the instance such as restaurant food and clothes
What happens to demand when the price if a complement decreases
Demand increases
What is a demand choke price
The price at which no consumer wants to buy
If demand increases what will happen to price and quantity available
Prices will rise and so will the quantity available
If supply decreases what will happen to prices and quantity available
Quantity decreases and prices will rise
What is price elasticity of demand
The percentage change in quantity demanded upon a given percentage change in price aka the consumers price sensitivity
What is the difference between the elasticity and the slope of a demand curve
The units, the slope is given in the unit of measurement while elasticity is in percent
How elastic is something that is elastic
It has elasticity 1
What are elasticities with a magnitude less than one called
Inelastic
What is unit elasticity
If the elasticity is 1 or -1
What is the magnitude of perfect inelasticity
0
What is the magnitude of perfect elasticity
+- infinity
In regards to price elasticity when is it optimal to lower the price for a producer than wants to increase revenue
When demand is elastic aka E < -1
How fi you know if decreasing production would lead to more revenue
If price elasticity is higher than unit elastic
