Econ 101 Exam 2 Flashcards
As Price increases, the Quantity Demand decreases
Law of Demand
A general measure of responsiveness
Elasticity
The response of 1 valuable to changes in another valuable
Elasticity
Measures the responsiveness of QD to changes in the P
Price Elasticity of Demand
The % change in QD resulting from a 1% change in P
Price Elasticity of Demand
ED = ______/________
%change in QD/% change in P
ED= ______ - ________ / ______
new - old / old
When any event shifts S or D the equilibrium in the market ______.
changes
Compare old equilibrium to a new equilibrium
Comparative Statictics
Ed is always ______ because of the law of demand
negative
|ED| _____ as move down a linear, downturned-sloping D curve
decreases
Buyers + Sellers _____ prices up and down (like an auction)
‘bid’
There is only one price where _______ = _______
Quantity Supply = Quantity Demand
Equilibrium = _______ = ________
Quantity Supply = Quantity Demand
Equilibrium is also known as “________”
Market clearing price
There is _______ to change in equilibrium
no tendency
At any P not = to P*, QS _____ DS and there is disequilibrium
does not =
Excess supply
Surplus
Excess demand
Shortage
If P > P*, then QS _____ QD
>
There is _________ on the P + QS decreases and QD increases until QS = QD
downward pressure (surplus)
In a shortage there is ______ on the P.
upward pressure
3 Categories of ED:
1.Elastic Demand
2. Inelastic Demand
3. Unit Elastic Demand
|ED| > 1
Elastic
|ED| < 1
Inelastic