Economics Chapter 4 - Elasticity

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PED ____ 1 = unit elastic

quantity demanded, income

The formula for calculating the income elasticity of demand is percentage change in ____ ______ / percentage change in ____

elasticity

The greater the proportion of income consumers spend on a good, the larger is the ______ of demand for that good.

more

The more time consumers have to adjust to a price change, or the longer that a good can be stored without losing its value, the _____elastic is the demand for that good.

quantity demanded, price

The price elasticity of demand is calculated by using the formula: percentage change in the ____ ____ / percentage change in the ____

same

Elasticity is a ratio of percentages, so a change in the units of measurement of price or quantity leaves the elasticity value the ____.

unit elastic

If the percentage change in the quantity demanded equals the percentage change in price, the price elasticity of demand equals 1 and the good has ____ ____demand

elastic demand

If the percentage change in the quantity demanded is greater than the percentage change in price, the price elasticity of demand is greater than 1 and the good has ____ ___

perfectly elastic

If the percentage change in the quantity demanded is infinitely large when the price barely changes, ... the price elasticity of demand is infinite and the good has a ____ ____ demand.

inelastic demand

If the percentage change in the quantity demanded is smaller than the percentage change in price, the price elasticity of demand is less than 1 and the good has ______ ____.

0.8

If the price elasticity of demand for a good is 0.8, then a 1% rise in the price leads to a ___% decrease in the quantity demanded

inelastic

If the quantity demanded changes BY a relatively small amount for a given change in price, then demand is ____

perfectly inelastic

If the quantity demanded doesn't change when the price changes, the price elasticity of demand is zero and the good has a ____ ___ demand.

perfectly inelastic

Marvin loves chocolate truffles. As the price of a chocolate truffle increases from $1 to $2 to $3, Marvin continues to buy a dozen chocolate truffles every week. Marvin's demand for chocolate truffles is ______

inelastic

Necessities, such as food or housing, generally have ______ demand.

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PED ___1 = elastic

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PED ____ 1 = inelastic

perfectly elastic

Supply is ____ _____ if the supply curve is horizontal and the elasticity of supply is infinite.

perfectly inelastic

Supply is ____ ______ if the supply curve is vertical and the elasticity of supply is 0.

demand

Suppose the price of burgers increases from $2 to $3 each. The degree to which quantity demanded responds to this price increase depends of the price elasticity of _____

total revenue

The ____ ___ from the sale of a good or service equals the price of the good multiplied by the quantity sold.

total revenue test

The ____ ____ ___ is a method of estimating the price elasticity of demand by observing the change in total revenue that results from a price change (when all other influences on the quantity sold remain the same).

elasticity of supply

The ____ ____ ____ measures the responsiveness of the quantity supplied to a change in the price of a good, when all other influences on selling plans remain the same.

price elasticity

The ____ ____ of demand is a units-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same.

income elasticity

The ____ ____ of demand measures how the quantity demanded of a good responds to a change in income, other things remaining the same.

more

The ____ time that passes after a price change, the greater is the elasticity of supply.

cross elasticity

The _____ ____ of demand is a measure of the responsiveness of demand for a good to a change in the price of a substitute or a complement, other things remaining the same.

elastic

The closer the substitutes for a good or service, the more _____ is the demand for the good or service.

negative

The cross elasticity of demand for a complement is ____.

positive

The cross elasticity of demand for a substitute is _____.

greater

The easier it is to substitute among the resources used to produce a good or service, the ____ is its elasticity of supply.

substitutes, income, change

The elasticity of demand for a good depends on: § The closeness of ______ § The proportion of _____ spent on the good § The time elapsed since a price _____

substitution, time frame

The elasticity of supply depends on § Resource _____ possibilities § ____ ____ for supply decision

quantity supplied, price

The elasticity of supply is calculated by using the formula: percentage change in ____ ____ / percentage change in ____

quantity demanded, substitute, complement

The formula for calculating the cross elasticity is: percentage change in quantity demanded / percentage change in price of ____ or _____

none

What is the unit for elasticity of demand?

does not change

When demand is unit elastic, price elasticity of demand equals 1 and total revenue (changes/does not change) when price changes

changes

When the price changes, total revenue _____

Momentary supply

____ ____ is perfectly inelastic. The quantity supplied immediately following a price change is constant.

long run

____-_____ supply is the most elastic.

short run

_____-___ supply is somewhat elastic.

decreases

§ If a price cut _____ total revenue, demand is inelastic.

unchanged

§ If a price cut leaves total revenue _____, demand is unit elastic.

doesn't always

A rise in price (always/doesn't always) increase total revenue.

top

At the ____-point of the demand curve, demand is elastic

bottom

At the ____-point of the demand curve, demand is inelastic.

mid

At the ____-point of the demand curve, demand is unit elastic.

inelastic

At the local ice cream parlor, when the price of half-gallons of chocolate ice cream was lowered by fifty cents per half-gallon, total revenue from the sale of chocolate ice cream decreased. This result indicates that the demand for chocolate ice cream is ____

decreasing

Demand is elastic when a price rise results in total revenue ____

increasing

Demand is inelastic when a price rise results in total revenue _____

normal

If the income elasticity of demand is greater than 1, demand is income elastic and the good is a _____ good.

income inelastic

If the income elasticity of demand is greater than zero but less than 1, demand is _____ _____ and the good is a normal good.

inferior

If the income elasticity of demand is less than zero (negative) the good is an _____ good.

elastic

Luxuries, such as exotic vacations, generally have ____ demand.

rises

Producers' total revenue will decrease if the price _____ and demand is elastic

unit elastic

Supply is ____ ____ if the supply curve is linear and passes through the origin. (Note that slope is irrelevant.)

inelastic

There are few if any good substitutes for motor oil. Therefore the demand for moto oil would tend to be ____

increases

§ If a price cut ___ total revenue, demand is elastic.