Chapter 5 (Elasticity)

Question 1

constant unitary elasticity

Answer 1

when a given percent price change in price leads to an equal percentage change in quantity demanded or supplied

Question 2

cross-price elasticity of demand

Answer 2

the percentage change in the quantity of good A that is demanded as a result of a percentage change in good B

Question 3

Elastic Demand

Answer 3

when the elasticity of demand is greater than one, indicating a high responsiveness of quantity demanded or supplied to changes in price

Question 4

Elastic Supply

Answer 4

when the elasticity of either supply is greater than one, indicating a high responsiveness of quantity demanded or supplied to changes in price

Question 5

Elasticity

Answer 5

an economics concept that measures responsiveness of one variable to changes in another variable

Question 6

Elasticity of Savings

Answer 6

the percentage change in the quantity of savings divided by the percentage change in interest rates

Question 7

Inelastic Demand

Answer 7

when the elasticity of demand is less than one, indicating that a 1 percent increase in price paid by the consumer leads to less than a 1 percent change in purchases (and vice versa); this indicates a low responsiveness by consumers to price changes

Question 8

Inelastic Supply

Answer 8

when the elasticity of supply is less than one, indicating that a 1 percent increase in price paid to the firm will result in a less than 1 percent increase in production by the firm; this indicates a low responsiveness of the firm to price increases (and vice versa if prices drop)

Question 9

Infinite Elasticity

Answer 9

the extremely elastic situation of demand or supply where quantity changes by an infinite amount in response to any change in price; horizontal in appearance

Question 10

Price Elasticity

Answer 10

the relationship between the percent change in price resulting in a corresponding percentage change in the quantity demanded or supplied

Question 11

Price Elasticity of Demand

Answer 11

percentage change in the quantity demanded of a good or service divided the percentage change in price

Question 12

Price Elasticity of Supply

Answer 12

percentage change in the quantity supplied divided by the percentage change in price

Question 13

Tax Incidence

Answer 13

manner in which the tax burden is divided between buyers and sellers

Question 14

Unitary Elasticity

Answer 14

when the calculated elasticity is equal to one indicating that a change in the price of the good or service results in a proportional change in the quantity demanded or supplied

Question 15

Wage Elasticity of Labor Supply

Answer 15

the percentage change in hours worked divided by the percentage change in wages