Flashcards
Key terms
Flashcards do conjunto (6)
- 1Elastic demand / elastic supplyAn increase in price will result in a more than proportionate increase in quantity demanded/supplied; elasticity will be greater than 1.
- 2Equilibrium priceThe price at which quantity demanded and quantity supplied are equal.
- 3Excess demandDemand is greater than supply.
- 4Price elasticity of demandThe responsiveness of quantity demanded to a change in price. Price elasticity of demand equals the percentage change in quantity demanded, divided by the percentage change in price.
- 5Substitute goodsThese have close alternatives, eg butter and margarine. If the price of one good increases the demand for the other increases and vice versa. The cross-elasticity of substitute goods is positive.
- 6Complementary goodsGoods that are related to each other: if the price of one increases the demand for the other falls and vice versa, for example petrol and cars. The cross-elasticity of complementary goods is negative.