Chapter 6: Price Elasticity Flashcards

1
Q

Elasticity

A

Concept measuring responsiveness of one variable to changes in another variable

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2
Q

Price Elasticity

A

(% change in quantity demanded or supplied)/(% change in price)

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3
Q

Elasticities (3)

A
  1. Elastic
  2. Unitary
  3. Inelastic
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4
Q

Elastic

A

Responsive to change in price (% change in quantity > % change in price)

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5
Q

Unitary

A

Proportional response of supply/demand to change in price (% change in quantity = % change in price)

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6
Q

Inelastic

A

Unresponsive to change in price (% change in quantity < % change in price)

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7
Q

Midpoint Method for Elasticity

A

Calculating Elasticity based on average % changes in quantity and price. Obtains same elasticity between 2 price points whether there is price increase or decrease.

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8
Q

Infinate/Perfect Elasticity

A

Quantity demanded/supplied changes by an infinite amount in response to change in price (exreme)

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9
Q

Zero Elasticity/Perfect Inelasticity

A

Change in price results in zero change in quantity (extreme)

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10
Q

Constant Unitary Elasticity

A

Price change of 1% results in quantity change of 1%

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