Chapter 5
the price elasticity of demand measures
buyers' responsiveness to a change in the price of a good
if the cross-price elasticity of two goods is negative, then the two goods are
complements
the case of perfectly elastic demand is illustrated by a demand curve that is
horizontal
to determine whether a good is considered normal or inferior, one could examine the value of the
income elasticity of demand for that good
if the demand for donuts is elastic, then a decrease in the price of donuts will
increase total revenue of donut sellers
if the price elasticity of supply for wheat is less than 1, then the supply of wheat is
inelastic
demand is said to be inelastic if the
quantity demanded changes proportionately less than the price
if the cross-price elasticity of two goods is positive, then the two goods are
substitutes
for a good that is a luxury, demand
tends to be elastic
if sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is
zero, and the supply curve is vertical