Econ Quiz 4 Flashcards
Price elasticity of demand
a measure of the responsiveness of quantity demanded to a change in price
Inelastic demand
-not responsive to a change in price
-few and costly substitutes
-steep demand curve
Elastic demand
-very responsive to a change in price
-many and cheap substitutes
-flatter demand curve
Quantity supplied
the amount one is willing and able to sell at a specific price
Law of supply
as price increases, quantity supplied increases and as price decreases, quantity supplied decreases
Formula
the absolute value of the percent change of quantity demanded divided by the percent change of price
Perfectly Elastic Demand
-no perfect substitutes
-demand parallel to x axis
Perfectly Inelastic Demand
-perfect substitutes
-demand parallel to y axis
Supply
the relationship between price and quantity supplied for a given good
Price Elasticity of Supply
a measure of the responsiveness of quantity supplied to a change in price
5 Supply Shifters
Price of related goods
Price of inputs
Expected future prices
The number of sellers
Productivity
Elastic Supply
-quantity supply is very responsive to a change in price
-easy to expand production
Inelastic Supply
-quantity supply is not very responsive to a change in price
-not easy to expand production
Substitute in Production
goods that can be replaced for another
-price of a substitute increases, then supply decreases
Complement in Production
goods that are jointly used
-price of a complement increases, then supply increases
