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22 Cards in this Set
- Front
- Back
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Elasticity is a measure of...
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the quantity demanded of a good to a change in its price, all other things remaining equal.
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Price elasticity of demand =
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% change quantity demanded / % change in price
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Price elasticity of demand depends on...
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how easily one good serves as a substitute for another, the proportion of income spent on the good, and the length of time elapsed since the price change.
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If the demand is elastic, a decrease in price leads to a(n)...
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increase in total revenue.
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If the demand is unit elastic, a decrease in price leads to a(n)
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unchanged total revenue.
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If demand is inelastic, a decrease in price leads to a(n)...
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decrease in total revenue.
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Cross elasticity of demand measures...
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the responsiveness of demand for one good to change in the price of a substitute or complement, all other things remaining equal.
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The cross elasticity of demand with respect to the price of a substitute is...
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positive.
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The cross elasticity of demand with respect to the price of a complement is...
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negative.
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Income elasticity of measures the responsiveness of....
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demand to a change in income, all other things remaining equal.
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For a normal good, the income elasticity of demand is...
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positive.
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For an inferior good the income elasticity of demand is...
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negative.
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When the income elasticity of demand is greater than 1 (income elastic), the percentage of income spent on the good ________ as the income _________.
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increases; increases
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Elasticity of supply measures...
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the responsiveness of the quantity supplied of a good to a change in its price.
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Elasticity of supply is usually _____ and ranges between ____
and ______. |
positive; zero (vertical supply curve); infinity (horizontal supply curve)
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What are the three time frames of monetary supply?
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-momentary
-long run -short run |
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Momentary supply refers to...
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the response of sellers to a price change at the instant that the price changes.
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Long run supply refers to...
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the response of sellers to a price change when all the technologically feasible adjustments to production have been made.
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Short run supply refers to...
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the response of sellers to a price change after some of the technologically feasible adjustments have been made.
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When elasticity of demand > 1 (income elastic), the percentage of income spent on the good _____ as income _______.
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increases; increases.
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When the income elasticity of demand is less than 1 (income inelastic and inferior), the percentage of income spent on the good _______ as income _____.
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decreases; increases
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Elasticity of supply measures...
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the responsiveness of the quantity supplied to a change in its price.
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