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19 Cards in this Set

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elasticity
a mesure of the responisivness of quantity demanded or quantity supplied to one of its determinants
Price elasticity of demand
how much the quantity demanded of goods responds to a change in the price of good
compute price elasticity of demand
the percentage change in quantity demanded divided by the percentage change in price
Three factors of elasticity
availability of close substitutes
necessities versus luxuries
definition of the market
time horizon
perfectly inelastic demand
an increase in price, leaves quantity demanded unchanged
fod market
total revenue
the amount paid by buyers and recieved by sellers of a good
computed total revenue
the price of the good times the quantity sold
when demand is inelastice the price and revenue move...
in the same direction
when demand is elastic, price and revenue move in....
opposite directions
income elasticity demand
measure of how much the quantity demanded of a good responds to a change in consumers income
computed income elasticy of demand
the percentage change in quantity demanded divided by the percentage change in income
cross-price elasticity
how much the quantity demanded to one good responds to a change in the price of another good
price elasticity of supply
how much the quantity supplied of a good responds to a change in the price of that good
computed price of elasticity of supply
the percentage change in quantity supplied divided by the percentage change in price
perfectly inelastic supply
and increase in price leaves the supply unchanged
midpoint method for calclualting price elasticity of demand
(Q2-Q1)/Q2+Q1)/2
(P2-P1)/(P2+P1)/2
Demand is considered elastic when
elasticity is greater than 1
Demand is considered inelastic when
elasticity is less than 1
Computed Cross-Price elasticity of demand
% change in quantity demanded Good 1
% change in the price of good 2