Elasticity Flashcards
Define Elasticity
Elasticity measures the responsiveness of one variable to the change in another variable.
What is the formula for PED
%Change in Quantity demanded/%change in price
Define PED
Price Elasticity of demand
A good is Unitary When
A good is elastic when…
A good is inelastic when
PED is almost always
When a good is perfectly elastic…
When PED =∞
A fall in Price will cause an infinate increase in Quantity demanded
Whilst A rise in price will make Quantity Demanded fall to zero
when a good is perfectly inelastic..
PED=0
Quantity demanded doesn’t Change as price increases
Define XPED
Cross-price Elasticity of Demand
What is the formula for XPED
%Change in Quantity demanded of good A/
%Change in price of good B
A substitute good is when…
A complementary good is when
substitute goods are..
Positive
complimentary goods are..
Negative
Define YED
Income Elasticity if Demand
What is the formula for YED
%Change in Quantity demanded/%Change in income .
A normal good is…
A inferior good is when
What is the relationship between PED and revenue when price is INELASTIC
What is the relationship between PED and revenue when price is ELASTIC
What does EOIS mean
E-lastic
O-pposite
I-nelastic
S-ame
What is a Giffen Good
A special type of inferior good where
Demand increases as Income increases.
