Chapter 8-9

Question 1

price elasticity of supply

Answer 1

The responsiveness of supply to a change in price

Question 2

Elastic supply

Answer 2

This means that producers are prepared to supply more when the price increases a little and supply less when the price decreases a little.

Question 3

Inelastic supply

Answer 3

A change in price results in a proportionately smaller change in supply.

Question 4

Income elastic

Answer 4

A change in income results in a greater change in demand.

Question 5

Income inelastic

Answer 5

A change in income results in a proportionately smaller change in demand.

Question 6

Normal good

Answer 6

A good for which demand will rise if income rises or fall if the income falls.

Question 7

Inferior good

Answer 7

A good for which demand will fall if income rises or demand will rise if income falls.

Question 8

Discretionary expenditure

Answer 8

Non-essential spending or spending that is not automatic

Question 9

Income elasticity of demand

Answer 9

The responsiveness of demand to a change in income

Question 10

Spare Capacity

Answer 10

The self still has room. Producers with spare capacity have the ability to produce more with their resources and take advantage of the high price.

Question 11

Mobility of production factors

Answer 11

Some producers are able to supply a variety of goods. Production resources are flexible, allowing the production of substitutes to be elastic. If cucumbers are doing better than carrots, you would switch and grow cucumber to make money. This also increase the supply.