Ch 5: Elasticity ECON 1001 May 12, 2025

Flashcards related to the key concepts of Elasticity.

Price elasticity of demand

Measures how responsive buyers are to price changes.

Elastic Demand

When the percent change in quantity is larger than the percent change in price.

Inelastic Demand

When the percent change in quantity is smaller than the percent change in price.

Elastic demand curves

Relatively flat.

Inelastic demand curves

Relatively steep.

Substitutes

More competing products means greater elasticity.

Necessities

Less elastic demand.

Consumer search

More elastic.

Timeframe

More elastic the longer the timeframe.

Total revenue

The total amount you receive from buyers.

Elastic demand strategy

Lower the price.

Inelastic demand strategy

Raise the price.

Cross-price elasticity of demand

A measure of how responsive the demand of one good is to price changes of another.

Complements

Goods that you consume together.

Substitutes

Goods that can replace one another.

Income elasticity of demand

Measures how responsive the demand for a good is to changes in income.

Inferior goods

Goods that you buy less of when your income goes up.

Normal goods

Goods that you buy more of when your income goes up.

Price Elasticity of Supply

A measure of how responsive sellers are to price changes.

Inventories

Inventories make supply more elastic.