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Related Flashcards
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Cards In This Set
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Elasticity
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Numerical measure of responsiveness of Quantity Demanded (Qd) to one of its
determinates.
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Law Of Demand
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Consumers will buy more of a product when prices decrease and less of a product when prices increase
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Price Elasticity of Demand Calculation
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Percentage change in Quantity Demanded
Percentage change in Price
Measures how much Qd responds to a change in Price
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All price elasticities are reported as not negative numbers - True of False
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True
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All price elasticities are reported as non negative numbers- True of False
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True
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The good that falls the most in % has the highest or lowest price elasticity of demand?
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Highest
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Is price elasticity higher or lower when there are substitutes available?
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Higher
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Is price elasticity higher or lower for narrowly defined goods than broader defined goods?
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Higher
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Is price elasticity higher or lower for luxuries then necessity goods?
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Higher
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Is price elasticity higher or lower in the long run?
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Higher
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What are the Four Determinites of price elasticity?
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1.) Extent to which close subsititues are available
2.)Whether the good is a necessity or luxury
3.)How broadly or narrowly the good is defined
4.)The time horizion- long or short run
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Percent Change Calculation
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End Value - Start Value
Start Value x100
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Percent Change Calculation - Midpoint formula
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End value - Start Value
Midpoint ( Average ) X100
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Elastic Demand
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Demand is Elastic when the percentage change in quantity demanded is greater than the percentage change in price- Greater than 1 in absolute Value
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Inelastic Demand
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Demand is Inelastic when the percentage change in quantity demanded is less than the percentage change in price- Less than 1 in absolute value
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