Econ 101 - Mod 5/ch 4 (Bn)

Front 1

What are the 3 ways that we can estimate price elasticity?

Back 1

1. Influences by some characteristics of the good.

2. Computing it using an equation.

3. By its relationship with total revenue.

Front 2

What is the equation for calculating price elasticity of remand?

Back 2

Price elasticity of demand =

% Change in quantity demanded /

% Change in price

Front 3

What 4 things should we be aware of when working with the price elasticity of demand equation?

Back 3

1.) The use of average price and quantity. 2.) The use of percentages. 3.) Price elasticity is units free. 4.) Price elasticity of demand will ALWAYS be negative.

Front 4

When is demand elastic? When is it inelastic?

Back 4

Demand is elastic when consumers respond strongly to a change in price. Demand is inelastic when buyers are not sensitive to a change in price.

Front 5

What is the formula for finding the midpoint to calculate a change in price?

Back 5

End value - Start value / midpoint X 100

Front 6

Name 3 factors that the price elasticity of goods depends on.

Back 6

Availability of substitutes, proportion of income spent on the good, and time allowed for adjustments.

Front 7

What is the formula for calculating cross elasticity of demand?

Back 7

Cross elasticity of demand =

% change of quantity demanded of good A /

% change of price in good B

Front 8

If goods A and B are substitutes, cross elasticity will be _______.

Of goods A and B are complements, cross elasticity will be ________.

Back 8

Positive, negative

Front 9

What is the equation for calculating income elasticity of demand?

Back 9

Income elasticity of demand =

% change in quantity demanded /

% change in income

Front 10

If income elasticity of demand is negative, then the good is a (an) ________ good.

Back 10

Inferior

Front 11

If income elasticity of demand is positive and greater than one, then the demand for the good is income _______.

Back 11

Elastic

Front 12

If income elasticity of demand is positive and less than one, then the demand for the good is income _________.

Back 12

Inelastic

Front 13

When income elasticity is positive, the percentage of income spent on a good changes as income _________.

Back 13

Increases

Front 14

For income elastic demand, as income increases, the percentage of income spent on a good ________.

Back 14

Increases

Front 15

For income inelastic demand, as income increases, the percentage of income spent on that good _________.

Back 15

Decreases

Front 16

What is the equation for calculating elasticity of supply?

Back 16

Price elasticity of supply = percentage change in quantity supplied / percentage change in price

Front 17

Name 2 factors that influence elasticity of supply.

Back 17

Availability of a resource substitute and time allowed for adjustment.

Front 18

_______ is the measure that we use to see by how much the equilibrium price falls and by how much the equilibrium quantity increases.

Back 18

Elasticity

Front 19

The total revenue test is a method of estimating the price elasticity of demand by observing the _________ that results from _________, when all other influences on the quantity sold remain the same.

Back 19

Change in total revenue, a change in price

Front 20

If the price elasticity of demand is greater than 1, demand is ______.

Back 20

Elastic

Front 21

If the prices elasticity of demand is less than 1, demand is ______.

Back 21

Inelastic

Front 22

If the price elasticity of demand equals 1, demand is _____ _______.

Back 22

Unit elastic

Front 23

When demand is _______, a price cut increases total revenue. When demand is _______, a price cut decreases total revenue.

Back 23

Elastic, inelastic