econ mod 10

income elasticity of demand

s the percent change in the quantity of a good demanded when a consumer's income changes divided by the percent change in the consumer's income.

What Factors Determine the Price Elasticity of Supply?

-availability of inputs -time

cross-price elasticity of demand

The cross-price elasticity of demand between two goods measures the effect of the change in one good's price on the quantity demanded of the other good. It is equal to the percent change in the quantity demanded of one good divided by the percent change in the other good's price.

perfectly elastic supply

There is perfectly elastic supply if the quantity supplied is zero below some price and infinite above that price. A perfectly elastic supply curve is a horizontal line.

complements

cross price negative strong negative, strong complements small change, weak complements

substitutes

cross price positive not close, small close, large

income elastic

if the income elasticity of demand for that good is greater than 1.

income inelastic

if the income elasticity of demand for that good is positive but less than 1.

price elasticity of supply

is a measure of the responsiveness of the quantity of a good supplied to the price of that good. It is the ratio of the percent change in the quantity supplied to the percent change in the price as we move along the supply curve.

perfectly inelastic supply

when the price elasticity of supply is zero, so that changes in the price of the good have no effect on the quantity supplied. A perfectly inelastic supply curve is a vertical line.