ECON 101 CH5 - Elasticity
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19 Terms
law of demand
when prices falls, the quantity demanded rises
price elasticity of demand
how responsive buyers are to price changes
elastic
responsive to changes in price; x>1
inelastic
not responsive to changes in price; x<1
a lot
How much does quantity demanded rise when demand is elastic?
only a little
How much does quantity demanded rise when demand is inelastic?
less
If demand is elastic, a higher price yields ___ revenue.
more
If demand is inelastic, a higher price yields ____ revenue.
price x quantity
total revenue formula
elastic
more competing products → _____
elastic demand
Specific brands tend to have more ____ ____ than categories of goods.
necessities
____ have less elastic demand.
consumer search
_____ ____ makes demand more elastic.
%change in quantity demanded/%change in price of another good
cross-price elasticity of demand
cross-price elasticity of demand
a measure of how responsive the demand of one good is to price changes of another
%change in quantity/%change in income
income elasticity of demand
elastic price of supply
when suppliers can increase the quantity supplied in response to higher prices
inelastic price of supply
when suppliers cannot increase the quantity supplied by much in response to higher prices
inventories, variable inputs, extra capacity and easy entry and exit
What determinants of supply make it elastic?