Chapter 5: Elasticity

Question 0

Subsided

Answer 0

Payments by government to producers to encourage production of a good or service.

Question 1

Price elasticity

Answer 1

The responsiveness of demand to a change in the price level. The formula is:
percentage demanded divided by percentage change in price.

Question 2

Incidence of tax

Answer 2

The proportion of a tax that is passed into the consumer. If most of a tax rise is added to the consumer then the incident of tax is said to be high.

Question 3

Income elasticity of demand

Answer 3

The proportion to which demand changes when there is a change in income.

Question 4

Substitutes

Answer 4

Goods that can be used as alternatives to another good, eg. Mars Bars and Snickers.

Question 5

Commodity

Answer 5

A good that is traded, but usually refers to raw materials or semi-manufactured goods that are traded in bulk such as tea, iron ore, oil or wheat.