Chapter 5
The price elasticity of demand is a measure of
Buyers' responsiveness to the changes in the price of a product
The extent to which the demand for a good changes when the price of a substitute or complement changes, other things remaining the same, is measured as
Cross elasticity of demand
The price of lumber increased by 10% and the quantity supplied increased by 20%. The supply of lumber is
Elastic
What is measured by the price elasticity of supply
How responsive producers are to changes in the price of a product
IF the income elasticity of demand for a good is 2, then when income rises 10%, the quantity demanded
Increases 20%
If the percentage change in the price of a good exceeds the percentage change in the quantity supplied, then the supply is
Inelastic
When the percentage change in the quantity demanded is less than the percentage change in price, then demand is
Inelastic
If the percentage in price is 10% and the demand is elastic, then the percentage change in the quantity demanded
Is larger than 10%
If the demand for a good is elastic, then
People substantially decrease the quantity of the good they buy if its price increases by a small percentage
The price elasticity of demand measures the _____ that results from a ______
Percentage change in the quantity demanded; percentage change in the price
The price of furnace filters increased by 5% and the quantity demanded did not change
Perfectly inelastic
What is the formula for the cross elasticity of demand? The percentage change in the
Quantity demanded/ percentage change in price of sub or compliment
The price elasticity of supply equals the percentage change in the
Quantity supplied divided by the percentage change in price
We calculate the price elasticity of demand as the
Ratio of the percentage change in the quantity demanded to the percentage change in price
Moving downward along a linear downward sloping curve, the
Slope is constant
If a 20% increase in the price of a good doe not change the quantity supplied, the
Supply is perfectly inelastic
The income elasticity of demand is a measure of
The extent to which the demand for a good changes when income changes
Price between two points on a demand curve result in
The same percentage, reguardless of whether and the price increases and decreases
If quantity supplied and the price change by the same percentage, then supply is
Unit elastic
When the percentage change in the quantity demanded equals the percentage change in the price, then demand is
Unit elastic
Perfectly inelastic demand means that consumers
Will buy a certain quantity, regardless of price
