Elasticity - Cross Price, Income, Supply

Question 1

what is cross-price elasticity of demand?

Answer 1

measures how sensitive Q of good A is to P of good B

Question 2

how to calculate cross-price elasticity of demand?

Answer 2

%priceB

Question 3

substitues: CPeD is __________

Answer 3

positive

Question 4

complements: CPeD is _________

Answer 4

negative

Question 5

what is income elasticity of demand?

Answer 5

measures how sensitive Q of a good is to changes in income

Question 6

how to calculate income elasticity of demand?

Answer 6

%change income

Question 7

Normal goods: IeD is ____________

Answer 7

positive

Question 8

Inferior goods: IeD is ___________

Answer 8

negative

Question 9

what type of goods cam be income-elastic?

Answer 9

normal

Question 10

when |IeD| > 1

Answer 10

income-elastic

Question 11

when |IeD| < 1, but positive

Answer 11

income-inelastic

Question 12

how to calculate price elasticity of supply?

Answer 12

%change P

Question 13

what factors affect price elasticity of supply?

Answer 13

1) Availability of Inputs

2) Time

Question 14

how does availability of inputs affect PeS?

Answer 14

If increased production is expensive, supply curve will be inelastic

If increased production is cheap, supply curve will be elastic

Question 15

how does time affect PeS?

Answer 15

PeS increases as producers have more time to respond to price changes

Long-run PeS usually higher than short-run