price elasticity of demand Flashcards
it is computed by choosing two points on the demand curve and comparing the percentage changes in quantity and price on those two points
arc elasticity
if the point of elasticity is less than 1, therefore it is ____ which means the good is ______
inelastic, essential
equal to 1, suggesting proportionate changes in quantity demanded and the price of goods
unitary elastic
if the point of elasticity is greater than 1, therefore it is _____ this means that the good is ______`
elastic, non-essential
it is the relationship between changes in quantity demanded for a good and a change in real income
income elasticity of demand
a positive sign for IE signifies that the good demanded is a ____ good, which is what the consumer tends to buy more when his or her income increases.
normal good
the negative sign indicates the demand for _____ goods, which are goods that are bought when incomes are low because low income prevents consumer from buying higher priced goods
inferior goods
it measures how quantity demanded changes as the price of related good changes
cross price elasticity
measures the responsiveness of the demand for a good to the change in price of a substitute good or a compliment
cpe
positive sign signifies that the two goods involved are _________ goods which means that as the price of the _________ goods increases, the demand for the other good will increase
substitute goods
negative sign indicates that the two goods are ______ goods, the goods will increase if the price of a ________ decreases
complement
it is the response of quantity offered for sale every change in price.
price elasticity of supply
goods that are easy to produce have _____ supply
elastic
goods that are hard to make are ________ supply
inelastic
what is the formula for elasticity of supply?
Ep= {(Q2-Q1)/Q2+Q1/2} divided by {(P2-P1)/P2+P1/2}
