elasticity

Question 1

elasticity

Answer 1

a measure of how quantity demanded (Qd) changes w/ respect to a change in price (P)

Question 2

elastic demand

Answer 2

• if Qd changes a lot as P changes, demand for this product is elastic
• shallow demand curve, gentle slope
• EXAMPLES: expensive items, luxury items/non-necessities, goods w/ substitutes

Question 3

inelastic demand

Answer 3

• if Qd changes a little as P changes, the demand is inelastic
• this demand curve will be steep
• EXAMPLES: necessities (gas, milk, medicine), goods w/out substitutes, low cost items

Question 4

unitary demand

Answer 4

• Qd & P change @ the same rate
• demand curve will have a 45 degree angle
• “middle ground” product with respect to price necessity, etc.

Question 5

perfectly elastic

Answer 5

• Qd changes even when theres no change in P
• demand curve is horizontal
• absolute non-necessity
• EXAMPLE: birthday candles

Question 6

perfectly inelastic

Answer 6

• Qd never changes, even w/ change in P
• vertical demand curve
• absolute necessity

Question 7

calculating elasticity

Answer 7

1. (Q2-Q1) / (avg Q)
2. (P2-P1) / (avg P)
3. ans 1 / ans 2

Question 8

calculating elasticity

Answer 8

1. (Q2-Q1) / (avg Q)
2. (P2-P1

Question 9

calculating elasticity pt 2

Answer 9

ans > 1 … elastic
ans < 1 … inelastic
ans = 1 … unitary
ans = undefined … perfectly elastic
ans = 0 … perfectly inelastic

Question 10

elasticity along a curve/graph

Answer 10

upper left = very elastic
bottom right = very inelastic