Lecture 3 - elasticity

Question 1

What is a elastic good?

Answer 1

A elastic good is where a small change in price causes a big change in quantity demanded. (value > 1)

Question 2

What is a inelastic good?

Answer 2

A inelastic good is where a large change in price has a small change in demand. (value < 1)

Question 3

Whats the equation for elasticity of demand?

Answer 3

% change in qd // % change price

Question 4

What are the factors that effect elasticity of demand?

Answer 4

Sustainability, proportion of income, luxury/necessities and time.

Question 5

Equation for elasticity of supply?

Answer 5

% change in quantity supplied // % change in price

Question 6

What is the equation for cross price elasticity of demand?

Answer 6

% change quantity demand good A // % change in price of good B.

Question 7

Whats the value for compliments?
Whats the value of substitutes?

Answer 7

0 to - infinity
0 to infinity

Question 8

Whats the definition for income elasticity?

Answer 8

% change in quantity demanded // % change in income

Question 9

What’s the value for inferior goods?
Whats the value for normal goods?
Whats the value for luxuries?

Answer 9

0 to -infinity
0 to 1
1 to infinity