Elasticity

Question 1

Price elasticity of supply ➡️ equation

Answer 1

percentage change in quantity supplied ➗ percentage change in price

Question 2

Determinants of price elasticity of supply pt1

Answer 2

Length of Time Period => Supply more elastic - long term

Productive Capacity =>
If at full capacity = supply will be probably inelastic
If not at full capacity = supply might be elastic.

Question 3

determines of price elasticity of supply pt2

Answer 3

Size of the firm/industry => Supply is more elastic in smaller firms.
Mobility of Factors of Production => Supply is more elastic if higher mobility.
Ease of Storing Stock=> more elastic for firms that can stock

Question 4

rice elasticity of demand ➡️ equation.

Answer 4

percentage change in quantity demanded ➗ percentage change in price

Question 5

Price elasticity of Demand

Answer 5

Demand of a good is elastic (or price sensitive) if the quantity demanded respond substantially to changes in prices.

Demand of a good is inelastic (or price insensitive) if the quantity demanded respond slightly to changes in prices

Question 6

Determinates of price elasticity of demand

Answer 6

1. Availability of substitutes - more elastic demand
2. Necessitates vs. luxuries - necessitates are inelastic demand ➡️ people buy no matter the price
3. Market - elastic demand

Question 7

Cross price elasticity

Answer 7

Measures how the quantity demanded of one good changes as the price of another good changes

Question 8

Cross price elasticity formula

Answer 8

Percentage change in quantity demanded of good (X) divided by the percentage change in the price of good (Y)

Question 9

Cost Minimization

Answer 9

Product life cycle from launch through to growth,
maturity and decline.

Firms keep cost at minimum when market in maturity

Firms can look at making other costs savings (i.e.
making human resources more efficient)

Productivity = Total Output divided by units of a
factor

Question 10

Determinates of price elasticity of demand pt.2

Answer 10

Proportion of income devoted to the product: the higher proportion of income devoted to the product the greater is the elasticity

Time horizon: more elastic demand over a longer time horizon