Flashcards
Chapter 5 Elasticity
Cards in this deck (22)
- 1Law of demandwhen the price of a good increases, quantity demand decreases
- 2Elasticitytells us by how much quantity demand will change when the price of a good changes
- 3Price elasticity of demandmeasures hoe responsive consumers are to a change in the price of a good
- 4Ed=% of change in qty
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% of change in price
*ignore the negative sign and use the absolute value - 5If Ed is greater than 1demand is elastic
- 6If Ed is less than 1demand is inelastic
- 7If Ed=1demand is unitary elastic
- 8Total Revenue=Price*Quantity
- 9For elastic goods, when price increases,total revenue decreases
- 10for elastic goods, when price decreases,total revenue increases
- 11for inelastic goods, when price decreases,total revenue decreases
- 12for inelastic goods, when price increases,total revenue increases
- 13Income Elasticityhow responsive is qty demanded to change in income
- 14Ey=% change in QTY
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% change in income - 15InferiorEy is negative
- 16NormalEy is positive and less than one
- 17LuxuryEy is greater than one
- 18Price is ALWAYS inthe denominator
- 19Eab=% change in Good A Demand
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% change in Good B Price - 20SubstitutesEab is positive
- 21ComplimentsEab is negative
- 22Elasticity of Supplyhow responsive sellers are to a change in price
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- Business/Economics Flashcards on Chapter 5 Elasticity , created by Kennedy Dean on 25/10/2022.
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- Kennedy Dean
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