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11 Cards in this Set
- Front
- Back
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What are the three types of elasticity?
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1. Price Elasticity of Demand
2. Income Elasticity of Demand 3. Cross-Price Elasticity of Demand |
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What is the price elasticity of demand?
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It is an elasticity that measure the responsiveness of the quantity demanded of a good to its price.
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What is the income elasticity of demand?
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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. |
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What is the cross-price elasticity of demand?
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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.
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If the elasticity is greater than 1, it is ________ _______.
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If the elasticity is greater than 1, it is relatively elastic.
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If the elasticity is less than 1, it is ________ _______.
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If the elasticity is greater than 1, it is relatively inelastic.
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If the elasticity is equal to 1, it is ________ _______.
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If the elasticity is equal to 1, it is unitaritary elastic.
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If the elasticity is equal to 0, it is ________ ________.
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If the elasticity is equal to 0, it is completely inelastic.
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If the elasticity is infinite, it is _______ __ _______.
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If the elasticity is infinite, it is always in demand.
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What is the price consumption line/curve?
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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. |
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What is a indifference curve?
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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.
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