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A Level Economics > Elasticity > Flashcards

Elasticity Flashcards

1
Q

What are the three major types of elasticity?

A

1) (Own) Price Elasticity of Demand (PED)
2) Cross-Price Elasticity of Demand (EX)
3) Income Elasticity of Demand (EY)

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2
Q

What is PED?

A

Price Elasticity of Demand

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3
Q

What is EX?

A

Cross-Price Elasticity of Demand

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4
Q

What is EY?

A

Income Elasticity of Demand

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5
Q

If a PED value is more than 1, what is this referred to as?

A

Price elastic

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6
Q

If a PED value is less than 1, what is this referred to as?

A

Price inelastic

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7
Q

If a PED value is exactly 1, what is this referred to as?

A

Unitary price elasticity

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8
Q

Price elastic would be a PED value of what?

A

More than 1

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9
Q

Price inelastic would be a PED value of what?

A

Less than 1

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10
Q

Unitary price elasticity would be a PED value of what?

A

Equal to 1

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11
Q

Why might it be important for a business to understand the price elasticity of a product?

A

If a product is price elastic (an increase in price would lead to far greater drop in demand) then it is not in the interests of a business to pursue a strategy as less sales would lead to a fall in income.

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12
Q

What are the three special cases limiting Price Elasticity on Demand?

A

1) Demand is perfectly elastic (perfect competition)
2) Demand is perfectly inelastic (essentials like water, or heroine for an addict)
3) Demand elasticity is at unity

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13
Q

What are some factors that determine price elasticity demand?

A

1) Substitubality
2) % of income
3) Necessities or luxuries
4) The ‘width’ of the market definition
5) Time

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14
Q

What is the calculation for Price Elasticity of Demand (PED)?

A

% change in the qty demanded

Divided by

% change in the price

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15
Q

What is the calculation for Cross-Price Elasticity of Demand (EX)?

A

% change in the qty demanded of Good A

Divided by

% change in the price of Good B

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16
Q

What is the calculation for Income Elasticity of Demand (EY)?

A

% change in qty demanded of A

Divided by

% change in consumer’s income

17
Q

What is price elasticity of supply?

A

The % change in supply relative to a % change in price.

18
Q

What is the calculation for Price Elasticity of Supply (ES)?

A

% change in qty supplied

Divided by

% change in price

19
Q

What are the main conditions of supply? SHIFTS of the curve

A

1) Costs of production
2) Technical progress
3) Taxes and other duties
4) Subsidies

20
Q

What are the factors determining price elasticity of supply? SLIDES along the curve

A

1) Length of production period
2) Spare capacity-to react to increased demand
3) Ease of stock accumulation
4) Ease of switching production methods
5) Number of firms in the market
6) Time to react to change in demand

A Level Economics (5 decks)

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