CH 4

Question 1

Elasticity

Answer 1

The ratio of the percentage change in a dependent variable to a percentage change in an independent variable

Question 2

Price elasticity of demand

Answer 2

The percentage change in quantity demanded of a particular good or service divided by the percentage change in the price of that good or service, all other things unchanged

Question 3

Arc Elasticty

Answer 3

Measure of elasticity based on percentage changes relative to the average value of each variable between two points

Question 4

Total Revenue

Answer 4

A firm’s output multiplied by the price at which it sells that output

Question 5

Price elastic

Answer 5

Situation in which the absolute value of the price elasticity of demand is greater than 1

Question 6

Unit price elastic

Answer 6

Situation in which the absolute value of the price elasticity of demand is equal to 1

Question 7

Price inelastic

Answer 7

Situation in which the absolute value of the price of elasticity of demand is less than 1

Question 8

Perfectly inelastic

Answer 8

Situation in which the price elasticity of demand is zero

Question 9

Perfectly Elastic

Answer 9

Situation in which the price elasticity of demand is infinite

Question 10

Income elasticity of demand

Answer 10

The percentage change in quantity demanded at a specific price divided by the percentage change in income that produced the demand change, all other things unchanged

Question 11

Cross Price elasticity of demand

Answer 11

It equals the percentage change in the quantity demanded of one good or service at a specific price divided by the percentage change in the price of a related good or service

Question 12

Price elasticity of supply

Answer 12

The ratio of the percentage change in quantity supplied of a good or service to the percentage change in its price, all other things unchanged