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15 Cards in this Set

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price elasticity of demand
The ratio of the percentage change in quantity demanded of a product or resource to the percentage change in its price; a measure of the responsiveness of buyers to a
change in the price of a product or resource.
midpoint formula
A method for calculating price elasticity of
de mand or price elasticity of supply that averages the two prices and
two quantities as the reference points for computing
percentages.
elastic demand
Product or resource demand whose price
elasticity is greater than 1. This means the resulting change in
quantity demanded is greater than the percentage change in price .
inelastic demand
Product or resource demand for which the
elasticity coefficient for price is less than 1. This means the resulting
percentage change in quantity demanded is less than the percentage
change in price .
unit elasticity
Demand or supply for which the elasticity coefficient
is equal to 1; means that the percentage change in the quantity demanded
or supplied is equal to the percentage change in price.
perfectly inelastic demand
Product or resource demand in
which price can be of any amount at a particular quantity of the
product or resource demanded; quantity demanded does not
respond to a change in price; graphs as a vertical demand curve .
perfectly elastic demand
Product or resource demand in
which quantity demanded can be of any amount at a particular
product price; graphs as a horizontal demand curve .
total revenue (TR)
The total number of dollars received by a
firm (or firms) from the sale of a product; equal to the total expenditures
for the product produced by the firm (or firms); equal
to the quantity sold (demanded) multiplied by the price at which
it is sold.
total-revenue test
A test to determine elasticity of demand between
any two prices: Demand is elastic if total revenue moves in
the opposite direction from price; it is inelastic when it moves in
the same direction as price; and it is of unitary elasticity when it
does not change when price changes.
price elasticity of supply
The ratio of the percentage change
in quantity supplied of a product or resource to the percentage
change in its price; a measure of the responsiveness of producers
to a change in the price of a product or resource.
market period
A period in which producers of a product are
unable to change the quantity produced in response to a change
in its price and in which there is a perfectly inelastic supply .
short run
(1) In microeconomics, a period of time in which producers
are able to change the quantities of some but not all of the
resources they employ; a period in which some resources (usually
plant) are fixed and some are variable.
(2) In macroeconomics, a
period in which nominal wages and other input prices do not
change in response to a change in the price level.
long run
(1) In microeconomics, a period of time long enough to
enable producers of a product to change the quantities of all the
resources they employ; period in which all resources and costs are
variable and no resources or costs are fixed.
(2) In macroeconomics,
a period sufficiently long for nominal wages and other input prices
to change in response to a change in a nation’s price level .
cross elasticity of demand
The ratio of the percentage
change in quantity demanded of one good to the percentage
change in the price of some other good. A positive coefficient indicates
the two products are substitute goods; a negative coefficient
indicates they are complementary goods .
income elasticity of demand
The ratio of the percentage
change in the quantity demanded of a good to a percentage change
in consumer income; measures the responsiveness of consumer
purchases to income changes.