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AS Econ Micro > Elasticity > Flashcards

Elasticity Flashcards

Elasticity of: Demand, Supply, income, Cross Price

1
Q

Define Price elasticity of demand?

A

The responsiveness of the quantity demanded to a change in price

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2
Q

What’s the PED formula

A

PED= %^Qd/%^P

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3
Q

What does it mean if PED is above 1

A

It is price elastic

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4
Q

What does it mean if PED is below 1

A

It is price inelastic

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5
Q

What are the factors affecting PED?

A 
Availability of substitutes 
Cost of switching supplier
Breadth of definition
Degree of necessity
Time frame
Brand loyalty 
% of income spent
Habitual demand (routine)
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6
Q

What does it mean if PED is 1

A

It is unitary elastic

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7
Q

What is total revenue (TR)

A

The amount of money made

Demand X price

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8
Q

What is marginal revenue (MR)

A

The change in revenue at each price

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9
Q

Define cross price elasticity of demand (XED)

A

The responsiveness of demand for one good to a change in the price of another good

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10
Q

What’s the formula for XED

A

XED = %^QdA/%^PB

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11
Q

What is the XED if it is >1

A

Close substitute good

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12
Q

What is the XED if it is <1

A

Distant substitute good

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13
Q

What is the XED if it is

A

Close compliment good

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14
Q

What is the XED if it is >-1

A

Distant compliment good

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15
Q

Define Income elasticity of demand (YED)

A

The responsiveness of demand for a good to change in income

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16
Q

YED formula

A

YED = %^Qd/%^Y

17
Q

What is YED is <0

A

It is an inferior good

18
Q

What is YED if it is between 0 and 1

A

A normal necessity good

19
Q

What is YED if it is above 1

A

It is a normal luxury good

20
Q

Define price elasticity of supply (PES)

A

The responsiveness of supple to a change in the price

21
Q

What is the formula for PES

A

PES = %^PES/%^P

22
Q

What is PES if it is between 0 and 1

A

It is inelastic

23
Q

What is PES if it is above 1

A

It is elastic

24
Q

Is the curve horizontal or vertical for perfectly inelastic

A

Horizontal

25
Q

Is the curve horizontal or vertical for perfectly elastic

A

Vertical

26
Q

What factors affect PES (4)?

A

Time (short term vs long term)
CELL (substitution of factors of production)
Ability to stock the product
Spare capacity (potential fulfilled?)

AS Econ Micro (10 decks)

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