AP Microeconomics - Elasticity

When the price and total revenue move in OPPOSITE directions, the good is ____

elastic

When the price and total revenue over in the SAME direction, the good is ___

inelastic

inelastic and price increases, the total revenue ___

also increases

inelastic and price decreases, the total revenue ___

also decreases

elastic and price increases the total revenue ___

decreases

elastic and the price decreases, the total revenue ___

increases

If the good is elastic, the price and total revenue ___

move in OPPOSITE directionsi

if the good is inelastic, the price and total revenue ___

move in the SAME direction

If a change in price does not change the total revenue, the good is ___

unit elastic

How to calculate the percentage change in price

(NEW - OLD) / (OLD)

elastic demand or supply

∆Qd > ∆P (greater than 1)

unit elastic demand or supply

∆Qd = ∆P (equal to 1)

inelastic demand or supply

∆Qd < ∆P (less than 1)

slope of a perfectly elastic curve (s or d)

0 (horizontal line)

slope of an elastic curve (s or d)

not steep

slope of a unit elastic curve (s or d)

1

slope of an inelastic curve (s or d)

very steep

slope of a perfectly inelastic curve (s or d)

undefined (vertical line)

goods that have easy to find substitutes are ___

elastic

goods don’t have many substitutes are ___

inelastic

necessities are ___

inelastic

equation for cross price elasticity

(∆Q of good B) / (∆P of good A)

positive cross price elasticity

substitutes

negative cross price elasticity

complementsco

substitutes will have a ___ (±) cross price elasticity

positive

complements will have a (±) cross price elasticity

negative

equation for income elasticity of demand

∆Q / ∆I (income)

positive income elasticity

normal goodsn

negative income elasticity

inferior good

normal goods have a (±) income elasticity

positive

inferior goods have a (±) income elasticity

negative