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Economy > Chapter 5 > Flashcards

Chapter 5 Flashcards

1
Q

An increase in price reduces quantity demanded and increases in quantity supplied in a market

A

True

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2
Q

Elasticity of Demand

A

Measures the responde of demand to changes in its determinants.

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3
Q

Price of Demand

A

Measures how the quantity demanded responds to a change in the price of that good.

% change in quantity demanded / % change in price

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4
Q

Elastic Demand

A

If the quantity demanded changes a lot.

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5
Q

Inelastic Demand

A

If the quantity demanded changes a little.

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6
Q

Factors in Elasticity of Demand

A

-Availability of close substitutes
-Necessities and luxuries
-Defining the market broadly
-Time Horizon

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7
Q

If there are more substitutes the demand will be _______________

A

More elastic

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8
Q

The longer the time period the ____________

A

More elastic

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9
Q

Perfectly inelastic is __________

A

Vertical

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10
Q

The flatter, the ________________ elastic is the curve.

A

More elastic

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11
Q

Changes in revenue because of elasticity

A

-Less than 1, increase in price increases revenue
-More than 1, increase in price decreases revenue
-Equal to 1, change in price has no impact

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12
Q

When price is high and quantity low, price elasticity is _________

A

Large

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13
Q

When price is low and quantity high, price elasticity is ______

A

Small

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14
Q

Price Elasticity of Demand Formula

A

Q/P

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15
Q

Income Elasticity of Demand

A

Measures how much the Q demanded responds to a change in consumer’s income

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16
Q

For normal goods, elasticity is ________

A

Positive

17
Q

For inferior goods, elasticity is ________

A

Negative

18
Q

Cross Price elasticity of demand

A

Measures one good to a change in price of a another good.

19
Q

Cross Price Elasticity of Demand Formula

A

% Change in Q of good 1 / % Change in P of good 2

20
Q

For substitutes elasticity is ________

A

Positive

21
Q

For complements, elasticity is ______

A

Negative

22
Q

Elasticity of Supply

A

Measures how much the quantity supplied responds to a change in the price of that good, calculated as the percentage change in Q.

23
Q

High price, low quantities, elasticity is large

A

Low price, high quantities, elasticity is small

24
Q

Applications of Supply and Demand Elasticity

A

-Market for Agricultural Products
-Market for oil
-Market for ilegal drugs

Economy (11 decks)

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