Ch.6- Elasticity

Question 1

Elasticity

Answer 1

how one economic variable responds to change in another (price and quantity)

Question 2

Price elasticity of demand

Answer 2

Elasticity of demand= percent change in quantity/ percent change in price

Question 3

PE of D elastic when…

Answer 3

|Ed|>1

Question 4

PE of D inelastic when…

Answer 4

|Ed|<1

Question 5

PE of D unit-elastic when…

Answer 5

|Ed|=1

Question 6

Graph properties for price elasticity of demand

Answer 6

-Steeper curve= less elastic
-Flatter curve= more elastic

Question 7

Midpoint formula

Answer 7

you know it and if you dont then oh well

Question 8

Determinants for Elasticity of Demand

Answer 8

-Availability of close substitutes (more subs=more elastic)
-Passage of time (more time passes= more elastic)
-Whether good is a luxury or necessity (luxury=more elastic)
-Definition of market (more narrowly defined=more elastic)
-Share in consumer’s budget (more dent in income= more elastic)

Question 9

Price elasticity of supply

Answer 9

Always positive