Microeconomics Notes 1.2: Elasticities

Inelastic supply

________ is where a change in price of a good or service leads to a proportionately smaller change in the quantity supplied of the good or service.

Elastic supply

________ is where a change in price of a good or service leads to a proportionately larger change in the quantity supplied of the good or service.

PES value

________ is between zero and one.

income elasticity

Calculate the ________ for demand (YED) for each item and state the kind of item it is.

Inelastic demand

________ is where a change in price of a good or service leads to a proportionately smaller change in the quantity demanded of the good or service.

Elastic demand

________ is where a change in price of a good or service leads to a proportionately larger change in the quantity demanded of the good or service.

Complementary goods

________ are goods which can be used together, such as MP3 players and headphones.

Substitute goods

________ are goods that can be used against each other, such as sugar or honey.

Inferior goods

________ have negative income elasticity of demand.

Normal goods

________ have positive income elasticity of demand.

Substitute goods

________ have a positive cross elasticity of demand.

Complementary goods

________ have a negative cross elasticity of demand.

1.2

Elasticities Definitions 1