Chapter 5 Micro Test Flashcards
Time Elapsed Since Price Change
What happens to consumer behavior during the long run and short run?
Longer the time the more sensitive consumers behavior is
Shorter the time the less sensitive consumer behavior is
Elasticity
Measures how much quantity demanded reacts to a change in price
Inelastic
When price changes demand SLIGHTLY changes
What is an example of 3 elastic products?
Newspaper
Porsche
Robert Graham-clothing
Elasticity Along a Linear Demand Curve
When people are more responsive at higher prices then lower prices
Proportion Income Spent
The more I spend on a product the more responsive I am
Cross Price Elasticity of Demand
How demand for one good changes when price of another good changes
What does unit of elastic mean
when quantity demanded and supply change at the same rate
Midpoint Method Formula
(Quantity two + Quantity one) / 2
Elastic
When price changes demand changes GREATLY
Narrowness of Definition
The more specific the product the more elastic demand is
What are 2 examples of unit elastic
When something is equal to one
And when supply increases by 8 and demand decreases by 8
What are 3 examples of Inelastic products
Toothbrush
Water
Paper Towel
Income elasticity of demand
How much demand for a good changes when income changes
How do you determine if a good is elastic versus inelastic?
less than 1= inelastic
Greater than one= elastic
