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