chapter 6 Flashcards
consumers responsiveness to a price change is measure by a product’s -price elasticity of demand-
a measure of the responsiveness of buyers to a change in the price of a product or resource.
we know from the downward sloping demand curve that price and quantity demanded are inversely related; thus price elasticity coefficient of demand Ed will always be a_____ number
negative
elastic
Product or resource demand whose price elasticity of demand is greater than 1, sensitive to price change
inelastic
less than one, insensitive to price change
unit elasticity
equal to one
perfectly inelastic
change in price results in no change in quantity demanded
perfectly elastic
small price reduction causes buyers to increase they purchases from zero to all they can obtain
total revenue
the Toal amount a seller receives from the sale of a product in a particular time period
TR = P XQ
if TR moves opposite of price change demand is?
elastice
if TR moves in same direction of price change demand is?
inelastic
if TR doesn’t change when price changes demand is
unitary
substitutability in elasticity
the more substitute goods that are available, the greater the price elasticity of demand, various candy bars are generally suitable for one another making it highly elastic
proportion of income in elasticity
price elasticity for low-priced items tends to be low
price elasticity for expensive items tend to be high
government puts taxes on what items
inelastic items
quantity supplied is responsive to price change
elastic
quantity supplied is insensitive to price change
inelastic
price elasticity of supply
a measure of the responsiveness of producers to a change in the price of a product or resource.
immediate market period
The length of time during which the producers of a product are unable to change the quantity supplied in response to a change in price and in which there is a perfectly inelastic supply.
ex: farmer will sell truckload of tomatoes whether price is high or low because he can’t grow tomatoes overnight and they go bad
short run
a period of time in which producers are able to change the quantities of some but not all of the resources they employ; a period in which some resources (usually plant) are fixed and some are variable.
long run
a period of time long enough to enable producers of a product to change the quantities of all the resources they employ, so that all resources and costs are variable and no resources or costs are fixed.
supply shows a_____ or_____ relationship between price and amount supplied
postive
supply of gold
inelastic
cross elasticity of demand
measures the sensitivity of consumer purchases of one product to a change in the price of some other product
income elasticity of demand
consumer respond to a change I their incomes by buying more or less of a particular good
normal goods
income-elascity positive
inferior goods
income elasticity negative
