M5 Flashcards

1
Q

how much buyers and sellers respond to changes in market

A

Elasticity

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2
Q

is the percentage change in quantity demanded given

A

Price Elasticity of Demand

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3
Q

calculating the price elasticity of demand

A

Midpoint Formula

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4
Q

price elasticity of demand is less than one.

A

Inelastic Demand

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5
Q

price elasticity of demand is greater than one.

A

Elastic Demand

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6
Q

DETERMINANTS OF PRICE ELASTICITY OF DEMAND

A
  • necessities versus luxuries
  • availability of close substitutes
  • definition of the market
  • time horizon
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7
Q

Demand tends to be more inelastic:

A
  • if the good is a necessity
  • time period is shorter
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8
Q

Demand tends to be more elastic:

A
  • if the good is a luxury
  • the longer the time period
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9
Q

amount paid by buyers

A

Total Revenue

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10
Q

change in consumer’s income

A

Income Elasticity of Demand

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11
Q

Types of Goods

A

Normal Goods
Inferior Goods

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12
Q

income elasticity is positive.

A

Normal Goods

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13
Q

income elasticity is negative.

A

Inferior Goods

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