Flashcards
Elasticity
Cards in this deck (13)
- 1PED XED YED PESPrice Elasticity of Demand
Cross Elasticity of Demand
Income Elasticity of Demand
Price Elasticity of Supply
they are all a measure of responsiveness. - 2Definition of PEDis a measure of how much the quantity demanded of a product changes when there is a change in price of a product.
- 3Inelastic demand + state valuea change in price of a product creates a proportionally smaller change in quantity demanded. Sellers have caused a raise in revenue by raising prices.
0 - 4Elastic demand + state valuea change in price of a product creates a proportionally larger change in quantity demanded. Sellers have caused a fall in total revenue, by raising prices.
1 - 5Unit Elastic demand + state valuea change in price of a product which creates a proportionate change in quantity demanded. Total revenue will not change.
PED=1 - 6Determinants of PEDS: Substitutes (no subs. -> inelastic)
P: Percentage of income requires (low income-> elastic)
L: Luxury? (elastic)
A: Addictive (inelastic)
T: Time Period (SHORT-> inelastic) - 7XEDis a measure of how much the demand of a product X changes when there is a change in price of a product Y.
- 8-, + and 0 values- : Complements
+: Subsitutes
0: unrelated goods.
The higher the values, the closer the compl/substitutes. - 9Importnat about XEDFirms have to be aware of possible impacts on demand, if rival products change their price.
- 10yedis a measure of how much the quantity demanded for a product changes, when there is a change in consumers income.
- 11positivenormal goods
income inelastic: between 0 and 1 equal too, necessity.
income elastic: over 1, luxury - 12negativeinferior good, as the income increases of consumers, demand will decrease of the product because consumers now can buy more superior goods.
- 13PESIs a measure of how much the quantity supplied of a product changes, when there is a change in price of the product.
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- International Baccalaureate (IB) Economics (Unit 4 - Elasticity) Flashcards on Elasticity, created by sofie von kaiser on 08/11/2016.
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- sofie von kaiser
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