Week 2 - Economic Perspectives Pt.2 Flashcards
What determines Demand?
- Price Point, including complementary goods
- Taste (social media, trends)
- Income
- Wants & Needs
- Substitute goods
What determines Supply?
- Cost of production
- Limitations of resources
Define Elasticity
The response of the dependent variable (quantity) to changes in the independent variable (price).
Explain Elasticity of Demand
It is the percentage change in quantity (demanded) that results from a given percentage change in price. The number is always negative, as one is always decreasing.
What is the Formula for Calculating Elasticity of Demand
Q% (Quantity)/ P% (Price)
What is Elastic Demand?
When the result of the formula is greater than 1. The elasticity of demand, or demand elasticity, refers to how sensitive demand for a good is compared to changes in other economic factors, such as price or income.
What is Unitary Demand?
When the result of the formula is equal to 1.
What is Inelastic Demand?
When the result of the formula is less than 1. An inelastic product is defined as one where a change in price does not significantly impact demand for that product.
