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6 Cards in this Set
- Front
- Back
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cross-price elasticity of demand
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a measure of how much the quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in quantity demanded of the first good divided by the percentage change in the price of the second good
ex: Butter Margarine +0.81 |
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elasticity
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a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants
ex: a curve greater than or equal to 1 is elastic |
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income elasticity of demand
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a measure of how much the quantity demanded of a good responds to a change in consumers’ income, computed as the percentage change in quantity demanded divided by the percentage change in income
ex: if, in response to a 10% increase in income, the demand for a good increased by 20%, the income elasticity of demand would be 20%/10% = 2 |
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price elasticity of demand
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a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price
ex: if the price increases by 5% and quantity demanded decreases by 5%, then the elasticity at the initial price and quantity = −5%/5% = −1 |
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price elasticity of supply
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a measure of how much the quantity supplied of a good responds to a change in the price of that good, computed as the percentage change in quantity supplied divided by the percentage change in price
ex: when the coefficient is less than one, the said good can be described as inelastic; when the coefficient is greater than one, the supply can be described as elastic. an elasticity of zero indicates that quantity supplied does not respond to a price change: it is "fixed" in supply |
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total revenue
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the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold
ex: (5)(10)=$50 |
