Elasticity Flashcards
What is elasticity?
big response to a price change
What is inelasticity?
little response to a price change
What is elasticity? (Number)
any number greater than 1
What is inelasticity? (Number)
any number less than 1
The more substitutes a good has, the more ___ is its demand
Elastic
Necessities are more price ____
inelastic
Narrowly defined markets have more ____ demand than broadly defined markets
elastic
Goods tend to have more _____ demand over longer time horizons
elastic
When Demand is elastic a percentage rise in price brings a ______ percentage fall in quantity demanded. Total revenue ____
greater, falls
If demand is _____, a price change leaves total revenue unchanged.
unit elastic
If Demand is inelastic, a percentage rise in price brings a ____ percentage fall in quantity demanded. Total revenue ___
smaller, rises
Netflix is one of the largest video streaming services. If netflix increases its average flat rate by 10 percent and its total revenue increases, then the demand for Netflix subscriptions is ____
price inelastic
Lowering the price is a good idea if Demand is ____: Total Revenue will increase.
Elastic
Raising the price is a good idea if Demand is ____: Total Revenue will increase.
Inelastic
For complements, the ____ elasticity is ___
cross-price, negative
For substitutes, the _____ elasticity is _____
cross-price, positive
For normal goods, the ______ elasticity is ____
income-price, positive
For inferior goods, the _____ elasticity is _____
income-price, negative
An increase in supply has a bigger impact on PRICE when DEMAND is _____
Inelastic
An increase in supply has a bigger impact on QUANTITY when DEMAND is ____
Elastic
An increase in demand has a bigger impact on PRICE when SUPPLY is ____
inelastic
An increase in demand has a bigger impact on QUANTITY when SUPPLY is ____
elastic
