Chapter 5(2) Flashcards
Perfectly Elastic
Customers will tolerate no change in price
Perfectly Inelastic
No matter how high the price, customers will buy
Price of elasticity of demand formula
percent change in quantity/percent change in price
Where does inelastic demand fall on a graph?
when the midpoint falls between 0 & 1, the change in price has little affect on quantity of demand
Where does elastic demand fall on a graph?
when the midpoint is over 1, the change in price has a relatively large affect on the quantity of demand
total revenue in elasticity
price * quantity (demanded (at the current price))
if demand is elastic, when price decreases, total revenue…
total revenue increases
If demand is inelastic, when price decreases total revenue…
decreases
If demand is unit elastic, when price increases, total revenue
remains constant
Where does unit elastic demand fall on a graph?
when the midpoint is
approximately equal to 1
(True/False) the more narrowly a product is defined, the less elastic the demand for that product will be
True
Define Elasticity
responsiveness (to the economy)
What are the 4 determinants of elasticity
substitutability, portion of income, luxury vs necessity, time
what does a perfectly inelastic graph look like?
vertical line
what does a perfectly elastic graph look like?
horizontal line
