Flashcards
Microeconomics Elasticity
Cards in this deck (16)
- 1Elasticity-Price elasticity of demand
-Income elasticity of demand
-Cross-price elasticity of demand - 2Price elasticity of demand (Ed)Measures price sensitivity
- 3Equation 1Ed = % change in QD/ % change in price
- 4Equation 2When the number are not in percentage term ---> use this equation first
- 5Equation 2.1% change in QD =
change in QD / Average of QD - 6Equation 2.2% change in Price =
change in Price / Average price
***compute into Equation 1*** - 7Sign of Ed : positive or negative?Theoretically, Ed is negative. In practice, drop the negative sign
- 8Slope is the same as Ed?Slope and Ed are not the same
- 9Slopeconstant throughout a straight line
- 10Edkeeps changing throughout a line
- 11Types of Elasticity1) Elastic Demand
2) Inelastic Demand
3) Unit elastic
4) Perfectly inelastic demand
5) Perfectly elastic demand - 12Elastic Demand- When price changes, QD will change a lot
- Quite price sensative
- Ed is ALWAYS greater than 1 - 13Inelastic Demand- When price changes, QD will change a little bit
- Not as price sensitive
- Ed is always less than 1 - 14Unit Elastic- % change in QD = % change in price
- Ed is equal to 1 - 15Perfectly inelastic demand- When price change, QD will not change at all
- Ed = 0 - 16Perfectly elastic demand- When price changes even just a little, consumers stop buying
- Ed = infinity
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- Flashcards on Microeconomics Elasticity, created by nkauyerlor on 12/10/2015.
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- nkauyerlor
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