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Elasticity
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- 1What is elasticity?The measure of responsiveness with which the consumer changes their demand to a change in price or change in income.
Percentage Change Formula:
New Value - Old Value ÷ Old Value x 100 - 2When is demand elastic?When the demand of elasticity is more negative than -1.
There is a total change in quantity. (Quantity effect)
Total spending decreases. - 3When is demand inelastic?When the demand of elasticity lies between than -1 and 0.
There is a total change in price. (Price effect)
Total spending increases. - 4When is demand unit elastic?When the demand of elasticity is -1.
Total change in price = Total change in quantity. - 5Define the Price of Elasticity DemandHow much the demand will change when there's a change in price.
%∆ Demand ÷ %∆ Price - 6Define 'Income of Elasticity Demand'The change of quantity demanded when there are changes in income.
The price of quantity price is kept constant.
%∆ Demand ÷ %∆ Income - 7Define 'Cross-Price Elasticity of Demand'Measurement of the demand of a good when the price of a related good changes.
%∆Quantity for Good A ÷
%∆Price for Good B - 8What is a substitute?Substitutes are alternatives (either other normal or inferior goods) to the main good.
Cross-price elasticity of demand is positive. - 9What is a complement?Complements work together with the good, creating a higher demand for the good.
Cross-price elasticity of demand is negative.
(This could also mean it's an independent good) - 10Define Elasticity of SupplyResponse of quantity supplies to a 1 percent increase in the price of the good.
%∆ Quantity Supplied ÷ %∆ Price
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- Flashcards on the elasticity of economics for South African students. (Made with love by a South African ECON1016 student at Wits University in 2015)
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- BryanTurner
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