Economics Flashcards
Own Price Elasticity
A measure of the responsiveness of the quantity demanded to a change in price. It is calculated as the ratio of the percentage change in quantity demanded to a percentage change in price
Elastic
an economic concept used to measure the change in the aggregate quantity demanded of a good or service in relation to price movements of that good or service. When the quantity demanded is very responsive to a change in price (absolute value of elasticity > 1), we say demand is elastic; we say demand is elastic; when the quantity demanded is not very responsive to a change in price (absolute value of elasticity < 1), we say that demand is inelastic.
Other factors affect demand elasticity in addition to the quality and availability of substitutes
- Portion of Income spent on a good
- Time
Portion of income spent on a good
Time
(unit or unitary elasticity
Income Elasticity
he sensitivity of quantity demanded to a change in income
Normal Goods
Inferior Goods
Cross-Price elasticity of Demand
Complements
What are the components of the Consumer Price Index?
What is the relationship between inflation and the purchasing power of money
