Chapter 4 Flashcards
The Price Elasticity of Demand
A units free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buying RTS.
Perfectly Inelastic Demand
when the quantity demanded remains constant when the price changes
Perfectly Elastic Demand
when the quantity demanded changes drastically while there is a tiny price change
Elastic Demand
Price Elasticity > 1
InElastic Demand
Price Elasticity < 1
Unit Elastic Demand
Price Elasticity = 1
Total Revenue
The price of a good multiplied by the quantity sold
Total Revenue Test
A method of estimating the price elasticity of demand by observing the change in the price, when all other influences on the quantity RTS
Income Elasticity of Demand
A measure of the responsiveness of the demand for a good or service to a change in income, other things RTS
Inferior Goods vs Income Elasticity
If the income elasticity of demand is negative, than the good is inferior
Cross Elasticity of Demand
A measure of the responsiveness of the demand for a good to change in the price of a substitute or a complement other things RTS
Elasticity of Supply
Measures the responsiveness of the quantity supplied to a change in the price of a good when all other influences on selling plans RTS
Momentary Supply
When the price of a good changes, the immediate response of the quantity supplied is determined by the momentary supply of that good.
Short-run Supply
The response of the quantity supplied to a price change when ONLY SOME of the possible adjustments to production can be made is determined by short-run supply.
Long-run Supply
The response of the quantity supplied to a price change after ALL of the technologically possible ways of adjusting supply have been exploited is determined by long-run supply.
