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ULL MBA 511 > Module 5 - Elasticity > Flashcards

Module 5 - Elasticity Flashcards

1
Q

___ is a measure of how responsive one variable is to a change in another variable.

A

Elasticity

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2
Q

What is elasticity’s role in economics?

A

It can be used to measure a variety of different questions because it has no unit of measure - just a number

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3
Q

___ is a measure of how responsive quantity demanded is to a chance in price; %ΔQd divided by %ΔP.

A

Price elasticity of demand (Ed)

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4
Q

The price elasticity of demand is always ___ due to ___.

A

Negative

Law of Demand

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5
Q

The ___ is a principle that states: as the price of a good, service or resource rises, the quantity demanded will fall, and vice versa (if all else remains constant).

A

Law of Demand

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6
Q

If P increases then Qd ___.

A

Decreases

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7
Q

If Qd increases then P ___.

A

Decreases

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8
Q

___ is when the middle values are focused on in a specific range of prices and quantity; ΔP divided by 2.

A

Midpoint

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9
Q

___ is price elasticity of demand greater than 1 in absolute value; consumers are more sensitive to changes in P; | Ed | > 1

A

Elastic demand

Wide linear demand curve

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10
Q

___ is price elasticity of demand less than 1 in absolute value; consumers are less sensitive to changes in P; | Ed | < 1

A

Inelastic demand

Steep linear demand curve

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11
Q

___ is price elasticity of demand equal to 1 in absolute value; P and Qd are equal; | Ed | = 1

A

Unit elastic demand

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12
Q

___ is an infinite price elasticity of demand where Qd is responsive to a change in P, Qd decreases to zero; | Ed | = ∞

A

Perfectly elastic demand

Horizontal linear demand curve

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13
Q

___ is when price elasticity of demand equal zero; Qd is non responsive to change in P; changes in price leave Qd unchanged; | Ed | = zero

A

Perfectly inelastic demand

Vertical linear demand curve

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14
Q

Which demand curve is elastic and inelastic?

A

A - inelastic

B - elastic

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15
Q

Which demand curve is perfectly elastic and perfectly inelastic?

A

C - perfectly elastic

D - perfectly inelastic

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16
Q

If demand is elastic, ↓P will ___ TR.

A

↑TR

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17
Q

If demand is inelastic ↑P will ___ TR.

A

↑TR

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18
Q

If demand is elastic, ↑P will ___ TR.

A

↓TR

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19
Q

If demand is inelastic, ↓P will ___ TR.

A

↓TR

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20
Q

Which is more elastic?

A. Frozen pizza, frozen food, all food

B. Candy bars vs Cars

C. Coffee vs Iceberg Lettuce

A

A. Frozen pizza - all other food frozen food is a substitute

B. Candy bars - a 50% increase in a car vs a candy bar (candy bar is relatively small compared to income)

C. Iceberg lettuce - more substitutes for iceberg lettuce (bib lettuce, spinach, arugula, romaine lettuce, green veggies, etc) than coffee (tea, water, soft drinks, etc)

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21
Q

Demand tends to be more ___ when more substitutions are available.

A

Elastic

22
Q

Demand tends to be more ___ when less substitutions are available.

A

Inelastic

23
Q

Demands tends to be more ___ when the P of a good or service is larger than proportion of income.

A

Elastic

24
Q

Demands tends to be more ___ when the P of a good or service is less than proportion of income.

A

Inelastic

25
Q

Demands tends to be more ___ when over time.

A

Elastic

26
Q

Inelastic: Necessity

Elastic: Luxury

What is a good or service that is inelastic? What is a good or service that is elastic?

A

Inelastic: Medical care, deodorant (Ed > 1)

Elastic: Vacation, perfume (Ed < 1)

27
Q

What are the determinants of elasticity?

  1. ___
  2. ___
  3. ___
A
  1. Necessities
  2. Luxuries
  3. Time
28
Q

___ is a measure of the effect of a change in the price of one product on the quantity demanded of another; %ΔQdb divided by %ΔPa; Eb/a.

A

Cross-price elasticity of demand (Eb/a)

Positive & Negative

29
Q

Cross-price elasticity of demand is always ___ for substitutes.

A

Positive

Always selling one or the other (+)

30
Q

Cross-price elasticity of demand is always ___ for complements.

A

Negative

Neither is being sold (-)

31
Q

___ is a measure of how responsive demand is to a change in consumer income; %ΔQd divided by %ΔPincome; Ei.

A

Income elasticity of demand (Ei)

32
Q

Inferior goods have a ___ income elasticity of demand (Ei).

A

Negative (Ei)

33
Q

Normal goods have a ___ income elasticity of demand (Ei).

A

Positive (Ei)

34
Q

___ is a measure of how responsive quantity supplied is to price changes; %ΔQs divided by %ΔP; Es.

A

Price elasticity of supply (Es)

35
Q

Price elasticity of supply is always ___ due to ___.

A

Positive due to the Law of Supply

36
Q

___ is a principle that states: as the price of a G, S, or R rises, the quantity supplied will increase and vice versa (if all else remains constant).

A

Law of Supply

37
Q

___ is price elasticity of supply greater than 1; consumers are more sensitive to changes in P; Es > 1

A

Elastic supply

Wide linear supply curve

38
Q

___ is price elasticity of supply less than 1; consumers are less sensitive to changes in P; Es < 1

A

Inelastic supply

Steep linear supply curve

39
Q

___ is price elasticity of supply equal to 1; P and Qs are equal; Es = 1

A

Unit-elastic supply

40
Q

___ is an infinite price elasticity of supply where Qs is responsive to a change in P, Qs decreases to zero; Es = ∞

A

Perfectly elastic supply

Horizontal linear supply curve

41
Q

___ is when price elasticity of supply equals zero; Qs is non responsive to change in P; changes in price leave Qs unchanged; Es = zero

A

Perfectly inelastic supply

Vertical linear supply curve

42
Q

Which supply curve is elastic and inelastic?

A

C - inelastic

D - elastic

43
Q

Which supply curve is perfectly elastic and perfectly inelastic?

A

A - perfectly inelastic

B - perfectly elastic

44
Q

___ is the time period in which producers cannot increase their economic resources to increase Qs.

A

Immediate period

45
Q

___ is the time period in which at least one input of production is fixed, but other inputs can be changed.

A

Short run

46
Q

___ is the time period in which all inputs of production can be changed.

A

Long run

47
Q

When consumers have less time to adjust to changes, demand becomes ___.

A

More inelastic

48
Q

The greater the change in price, the ___ reliable the elasticity estimate is going to be.

A

Less

49
Q

The ___ of a demand curve is the change in price divided by a change in Qd.

A

Slope

50
Q

What is Eb/a signifying?

A

For every 1% increase in a substitute or complement () there is an increase or decrease in ()

51
Q

For most goods, the longer the time frame, the more ___ the elasticity of a good.

A

Elastic

Long-run more elastic than short-run

ULL MBA 511 (7 decks)

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