Elasticity

A measure of how responsive a quantity demanded is to a change in price; calculated as the percentage change in quantity demanded divided by the change in price

Price Elasticity of Demand

Demand tend to be more________over a long period of time

elastic

Demand tends to be relatively more _________ when the price of a good or service, as a proportion of income is larger

elastic

Larger swings in the quantity traded ....

elastic

the narrower the market, the more_________ a product is

elastic

Demand tends to be relatively more _________ when the price of a good or service, as a proportion of income is smaller

inelastic

For an __________ product, a decrease in supply actually increases total revenue in the market

inelastic

Larger swings in price if demand is relatively...

inelastic

Supply is perfectly _________ when the value of the price elasticity is zero

inelastic

The broader the market, the more _________a product is

inelastic

when the proportion of income spent on a good is small, the demand is relatively

inelastic

A negative income elasticity denotes the product is a _____ good

inferior

demand decreases when income increases, negative elasticity of demand

inferior goods

The time period in which all inputs of production can be changed.

long run

good is elastic and income elasticity is greater than one

luxury good

The burden of tax is reliant on whether producers or consumers are more ___________ to the price increase

sensitive

The time period in which at least one input of production is fixed but other inputs can be changed

short run

A good is more elastic when it is specific or general?

specific

If cross price elasticity is positive, the two goods are....

substitutes

Elasticity Equation

%change in quantity/percent change in price

The ratio of percent change in the quantity supplied of a good or service in to the percentage change in price, all other things unchanged.

Elasticity of Supply

the time period in which producers cannot increase their use of economic resources to increase quantity supplied

Immediate period

Income elasticity of demand is a measure of how responsive _______

demand is to a change in consumer income

is it easier or harder for firms to raise prices with inelastic demand

easier

if cross price elasticity is negative, the two goods are...

complements

When a good accounts for a large proportion of income it is...

more elastic

A positive income elasticity denotes the product is a _____ good

normal

Demand increases when income increases, positive elasticity of demand

normal goods

A luxury good is a ________ with a demand that is ________ in response to a change in change in income. E>0 absE>1

normal, elastic

Price elasticity of supply is negative or positive

positive

A measure of how responsive quantity supplied is to a change in price

price elasticity of supply