48: Other elasticities

Question 1

cross price elasticity of demand

Answer 1

measures the effect of the change in one good’s price on the quantity demanded of the other good

Question 2

cross price elasticity of demand equation

Answer 2

%∆Qa / %∆Pb

Question 3

negative cross price elasticity

Answer 3

complements

Question 4

positive cross price elasticity

Answer 4

substitutes

Question 5

income elasticity of demand

Answer 5

measures how changes in income affect the demand for a good

Question 6

income elasticity of demand equation

Answer 6

%∆Q / %∆income

Question 7

positive income elasticity of demand

Answer 7

normal good

Question 8

negative income elasticity of demand

Answer 8

inferior good

Question 9

income-elastic

Answer 9

income elasticity of demand > 1
when income inc, demand rises faster
ex: luxury goods

Question 10

income-inelastic

Answer 10

0 < income elasticity of demand < 1
when income inc, demand rises slower
ex: staple goods

Question 11

price elasticity of supply equation

Answer 11

%∆Qs / %∆P

Question 12

perfectly inelastic supply

Answer 12

vertical line, Pes = 0

Question 13

perfectly elastic supply

Answer 13

horizontal line

quantity supplied = 0 below some price and infinite above that price

Question 14

determinants of price elasticity of supply

Answer 14

1) availability of inputs

2) time