Elasticity

mavina
Flashcards by mavina, updated more than 1 year ago
mavina
Created by mavina over 7 years ago
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Economics - Micro Unit 1

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Question Answer
Percentage change new value - old value DIVIDED by old value x 100
Price elasticity of demand Refers to how much demand will change when there is a change in price
Price elasticity of demand formula % change in quantity demanded DIVIDED by % change in price
Price elasticity = 0 Perfectly inelastic = no change in demand no matter what the price
Between 0 - 1 Inelastic - total revenue will fall
Above 1 Elastic - total revenue will rise if prices are lowered
Income elasticity of demand Refers to how demand changes when there is a change in income
Income elasticity of demand formula % change in quantity demanded DIVIDED by % change in income
Cross price elasticity of demand Examines the demand for one product when the prices of another changes (subsitutes)
Cross price elasticity of demand formula % change in quantity demanded for good A DIVIDED by % change in price of good B
Price elasticity of supply Refers to the responsiveness of supply to changes in the price level
Price elasticity of supply formula % change in quantity supplied DIVIDED by % change in price
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