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