Ch. 5

Question 1

cross-price elasticity of demand

Answer 1

A measure of how responsive the demand of one good is to the price changes of another. = % change in quantity demanded/ % change in price of another good

Question 2

elastic

Answer 2

When the absolute value of the percent change in quantity is larger than the absolute value of the percent change in price, which means that the absolute value of the price elasticity is greater than 1.

Question 3

income elasticity of demand

Answer 3

A measure of how responsive the demand for a good is to changes in income. It measures the percent change in quantity demanded that follows from a 1% change in income. = % change in quantity demanded / % change in income

Question 4

inelastic

Answer 4

When the absolute value of the percent change in quantity is smaller than absolute value of the percent change in price, which means that the price elasticity is less than one.

Question 5

perfectly elastic

Answer 5

When any change in price leads to an infinitely large change in quantity.

Question 6

perfectly inelastic

Answer 6

When quantity does not respond at all to price changes

Question 7

price elasticity of demand

Answer 7

A measure of how responsive buyers are to price changes. = % change in quantity demanded/ % change in price

Question 8

price elasticity of supply

Answer 8

A measure of how responsive sellers are to price changes. = % change in quantity supplied / % change in price

Question 9

total revenue

Answer 9

The total amount you receive from buyers, which is calculated as price x quantity