Chapter 5 Key Concepts

Question 1

How is price elasticity computer?

Answer 1

The % change in quantity demanded (or supplied) /
——————-divided by———————————
The % change in price

Question 2

What are 3 types of Elasticity

Answer 2

1. Elastic (very responsive)
2. Unitary Elastic
3. Inelastic (Very unresponsive)

Question 3

_______ demand or supply curves indicate that quantity demanded or supplied respond to price changes in a greater than proportional manner.

Answer 3

Elastic

Question 4

An _________ demand or supply curve is one where a given percentage change in price will causee a smaller percentage change in quantity demanded or supplied.

Answer 4

Inelastic

Question 5

A _______ means that a given percentage change in price leads to an equal percentage change in quantity demanded or supplied.

Answer 5

Unitary Elasticity

Question 6

________ elasticity refers to the extreme case where either the quantity demanded or supplied changes by an infinite amount in response to any change in price at all.

Answer 6

Infinite or Perfect Elasticity

Question 7

_______ elasticity refers to the extreme case in which a percentage change in price no matter how large, results in zero change in quantity.

Answer 7

Zero

Question 8

_______ in either a supply or demand curve refers to a situation where a price change in one percent results in a quantity change of one percent.

Answer 8

Constant Unitary Elasticity

Question 9

How does a tax incidence impact consumers and producers?

Answer 9

Supply is more Elastic than demand = Buyers bear tax burden

When demand is more elastic than supply= Producers bear most of the cost of tax

Question 10

Tax revenue is _______ the more inelastic demand and supply are.

Answer 10

Inelastic

Question 11

________ refers to:

the change in one variable
————divided by——————-
percentage change of a related variable

Answer 11

Elasticity

Question 12

% change in Qd
—-divided by____
% change in Income

Answer 12

Income Elasticity of Demand

Question 13

% change in Qd
—–divided by——
% change in price of another good

Answer 13

Cross-Price Elasticity of Demand

Question 14

How does Elasticity apply in Labor Markets and Financial Capital Markets?

Answer 14

• The wage Elasticity of Labor Supply

- The Elasticity of Savings w/ respect towards Interest

Question 15

% change in Q of hours supplied
—–divided by—–
% change in the wage

Answer 15

Wage Elasticity of Labor

Question 16

% change in Q of savings
——divided by—–
% change in interest rates

Answer 16

Elasticity of Savings