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11 Cards in this Set
- Front
- Back
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What is the formula for price elasticity of demand?
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% change in quantity demanded/ % change in price
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What does price elasticity Measure?
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The response of consumers to a change in price.
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According to the price elasticity of demand at what percent is the price elastic, in-elastic, and unitary elastic?
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If the elasticity is greater than 1 it is elastic, and it means that consumers are more likely to respond to a price change, at 1 it is unitary elasticity and consumers are neither likely or not likely to respond to price change, at less that 1 it is in-elastic and consumers are not likely to respond to price change.
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What are the determinants of price elasticity of demand?
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Neccesities vs. Luxuries
Availability vs Substitutions Price of goods relative to income Time |
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Define Total revenues. What is the formula?
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Total revenues is the amount of money received from product sales. The formula is:
Total rev = price * quantity sold |
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What is the relationship between price elasticity of demand, total revenues, and price?
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What is the formula for the income elasticity of demand?
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What is the difference between normal good and inferior good?
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Income increases Quantity demand increases
Income Decreases Quantity demanded decreases Inferior good Income increases Quantity decrease Income decreases Quantity increases |
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According to the income elasticity of demand, under what conditions is a good or service normal; inferior?
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Normal good IED > 0
Inferior good IED < 0 |
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What is the formula for Cross Price elasticity of demand?
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What does CPED measure?
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If CPED is positive the two are substitutes
If CPED is negative the two are compliments. |
