Elasticity

elastic

Long-run supply is the most ____

elastic

Luxuries, such as exotic vacations, generally have _____ demand - b/c of they have many substitutes.

the greater is its elasticity of supply.

The easier it is to substitute among the resources used to produce a good or service, __________

Resource substitution possibilities Time frame for supply decision

The elasticity of supply depends on

elasticity

The greater the proportion of income consumers spent on a good, the larger is its ______ of demand.

cancel out.

The measure is units free because it is a ratio of two percentage changes and the percentages ______

the greater is the elasticity of supply.

The more time that passes after a price change,

perfectly inelastic

Momentary supply is _______. The quantity supplied immediately following a price change is constant.

The point elasticity =

(DQ/DP)*(P/Q).

Elastic

At prices above the mid-point of the demand curve, demand is ___________

Inelastic

At prices below the mid-point of the demand curve, demand is ________

rises or falls.

By using the average price and average quantity, we get the same elasticity value regardless of whether the price __________

inelastic

If a price cut decreases total revenue, demand is ____

elastic

If a price cut increases total revenue, demand is ____

unit elastic.

If a price cut leaves total revenue unchanged, demand is ______

elastic

If demand is _____ , a 1 percent price cut increases the quantity sold by more than 1 percent, and total revenue increases.

inelastic

If demand is ______, a 1 percent price cut decreases the quantity sold by more than 1 percent, and total revenues decreases.

unitary elastic

If demand is _______, a 1 percent price cut increases the quantity sold by 1 percent, and total revenue remains unchanged.

normal

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

normal

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

inferior

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

perfectly inelastic demand.

If the quantity demanded doesn't change when the price changes, the price elasticity of demand is zero and the good as a ______

inelastic

Necessities, such as food or housing, generally have ________ demand - b/c of poor substitutes.

elasticity of demand formula

Percentage change in quantity demanded/Percentage change in price

elastic

Short-run supply is somewhat ____

perfectly inelastic

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

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.

The elasticity of demand for a good depends on:

The closeness of substitutes The proportion of income spent on the good The time elapsed since a price change

elastic are the demand for it.

The closer the substitutes for a good or service, the more ____

negative

The cross elasticity of demand for a complement is _____.

Positive

The cross elasticity of demand for a substitute is ____.

percentage changes.

The ratio of two proportionate changes is the same as the ratio of two _______

The total revenue test

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).

absolute value

measure that reveals how responsive the quantity change has been to a price change.

income elasticity of demand

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

elasticity of supply

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.

Point elasticity

refers to the elasticity at a specific point on the demand curve. That is, the elasticity at a given price and quantity combination.

unit elastic demand

the price elasticity of demand equals 1 and the good has _______

elastic demand.

the price elasticity of demand is greater than 1 and the good is said to have an _______

inelastic demand.

the price elasticity of demand is less than 1 and the good is said to have an ___

total revenue

the sale of good or service equals the price of the good multiplied by the quantity sold.

price elasticity of demand

unit free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on demand constant.