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IB Economics > PED > Flashcards

PED Flashcards

1
Q

elasticity

A

measure of responsiveness how much a dependent variable changes in response to a change in an independent variable

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2
Q

What change leads to what change?

A

change in price leads to a change in quantity demanded

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3
Q

percentage change (price)

A

(Pn - Po)/Po x100

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4
Q

price elasticity of demand

A

percentage change in quantity demanded in response to a percentage change in price

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5
Q

PED equation

A

(Qn - Qo) x Po / (Pn - Po) x Qo

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6
Q

What type of value do you take from the PED equation?

A

absolute (positive value)

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7
Q

PED greater than 1

A

price elastic

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8
Q

PED less than 1

A

price inelastic

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9
Q

PED equals 1

A

unitary price elastic

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10
Q

How do you label PED on demand curve?

A
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11
Q

Where does unitary elasticity of demand occur?

A

at midpoint halfway between its intersection of the x and y axes

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12
Q

total revenue equation

A

TR = price x quantity demanded

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13
Q

How do price - quantity demanded and total revenue - quantity demanded curves align?

A
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14
Q

Price elastic: price increases

A

Qd decreases TR decreases

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15
Q

Price elastic: price decreases

A

Qd increases TR increases

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16
Q

Price inelastic: price increases

A

Qd decreases TR increases

17
Q

Price inelastic: price decreases

A

Qd increases TR decreases

18
Q

Unitary elastic: price increases

A

Qd decreases TR no change

19
Q

Unitary elastic: price decreases

A

Qd increases TR no change

20
Q

availability and closeness of substitues for the good

A

greater number and closer substitues, higher PED

21
Q

time available to adjust to changes in price

A

more time available: higher PED

22
Q

long run

A

time sufficient to fully adjust to a change of price

23
Q

short run

A

any time shorter than long run

24
Q

necessity or luxury?

A

more necessity of good, lower PED

25
Q

addictive/habit-forming?

A

more addictive good, lower PED

26
Q

proportion of income spent

A

greater proportion of income spent on good, higher PED

27
Q

perfect elasticity of demand

A

Ed = undefined a lot is available at this price so consumers not willing to pay more and foolish for producers to charge less

28
Q

perfect inelasticity of demand

A

Ed = 0 consumers only buy a fixed amount of good, does not vary with price

29
Q

perfect unitary elasticity of demand

A

P x Q = k (constant) shape of curve is rectilinear hyperbola

IB Economics (29 decks)

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