2305041
Description
Flashcards by BryanTurner, updated more than 1 year ago
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Created by BryanTurner
almost 10 years ago
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| Question | Answer |
| What is elasticity? | The measure of responsiveness with which the consumer changes their demand to a change in price or change in income. Percentage Change Formula: New Value - Old Value ÷ Old Value x 100 |
| When is demand elastic? | When the demand of elasticity is more negative than -1. There is a total change in quantity. (Quantity effect) Total spending decreases. |
| When is demand inelastic? | When the demand of elasticity lies between than -1 and 0. There is a total change in price. (Price effect) Total spending increases. |
| When is demand unit elastic? | When the demand of elasticity is -1. Total change in price = Total change in quantity. |
| Define the Price of Elasticity Demand | How much the demand will change when there's a change in price. %∆ Demand ÷ %∆ Price |
| Define 'Income of Elasticity Demand' | The change of quantity demanded when there are changes in income. The price of quantity price is kept constant. %∆ Demand ÷ %∆ Income |
| Define 'Cross-Price Elasticity of Demand' | Measurement of the demand of a good when the price of a related good changes. %∆Quantity for Good A ÷ %∆Price for Good B |
| What is a substitute? | Substitutes are alternatives (either other normal or inferior goods) to the main good. Cross-price elasticity of demand is positive. |
| What is a complement? | Complements work together with the good, creating a higher demand for the good. Cross-price elasticity of demand is negative. (This could also mean it's an independent good) |
| Define Elasticity of Supply | Response of quantity supplies to a 1 percent increase in the price of the good. %∆ Quantity Supplied ÷ %∆ Price |
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