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### 11 Cards in this Set

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 What are the three types of elasticity? 1. Price Elasticity of Demand 2. Income Elasticity of Demand 3. Cross-Price Elasticity of Demand What is the price elasticity of demand? It is an elasticity that measure the responsiveness of the quantity demanded of a good to its price. What is the income elasticity of demand? It measure the responsiveness of the quantity demanded of a good to the income of the people demanding the good. It is measured as the percentage change in demand that occurs in response to a percentage change in income. What is the cross-price elasticity of demand? It measures the rate of response of quantity demanded of one good, due to a price change of another good. If two goods are substitutes, we should expect to see consumers purchase more of one good whent eh price of its substitute increases. If the elasticity is greater than 1, it is ________ _______. If the elasticity is greater than 1, it is relatively elastic. If the elasticity is less than 1, it is ________ _______. If the elasticity is greater than 1, it is relatively inelastic. If the elasticity is equal to 1, it is ________ _______. If the elasticity is equal to 1, it is unitaritary elastic. If the elasticity is equal to 0, it is ________ ________. If the elasticity is equal to 0, it is completely inelastic. If the elasticity is infinite, it is _______ __ _______. If the elasticity is infinite, it is always in demand. What is the price consumption line/curve? If the price of one commodity (x) changes a new set of combinations (x,y) is created between the changing tangents of the budget line and indifference curves forming the 'price-consumption curve' for the commodity (x)- assuming constant income and prices of the other commodity (y). The price-consumption curve shows how much of a commodity (x) is purchased if its price changes. What is a indifference curve? It is a graph showing combinations of goods for which a consumer is indifferent, that is, it has no preference for one combination versus another. They are a device to represent preferences and are used in choice theory.