Skip to main content
Indietro

Microeconomics: Elasticity Concepts and Applications

I pulsanti di controllo sono stati cambiati in modalità "navigazione".
1/23

Termini in questo insieme (23)

  • What is Price Elasticity of Demand?

    Price Elasticity of Demand measures the responsiveness of quantity demanded to a change in price, calculated as the absolute value of the percentage change in quantity demanded divided by the percentage change in price.

  • How is Price Elasticity of Demand calculated using the midpoint method?

    Percentage change in Qd = change in Qd / [(Qd1 + Qd2)/2], Percentage change in P = change in P / [(P1 + P2)/2], then Ed = % change in Qd / % change in P.

  • What does it mean if Price Elasticity of Demand (Ed) > 1?

    Demand is elastic, meaning quantity demanded changes by a greater percentage than the price change.

  • What does it mean if Price Elasticity of Demand (Ed) < 1?

    Demand is inelastic, meaning quantity demanded changes by a smaller percentage than the price change.

  • What is unit elastic demand?

    When a 1% change in price causes exactly a 1% change in quantity demanded, Ed = 1.

  • What is perfectly inelastic demand?

    Quantity demanded does not change when price changes, Ed = 0.

  • What is perfectly elastic demand?

    Quantity demanded changes infinitely with any price change, Ed = infinity.

  • List the determinants of Price Elasticity of Demand.

    Availability of substitutes, proportion of income spent on the good, whether the good is a luxury or necessity, and time consumers have to adjust to price changes.

  • How does availability of substitutes affect elasticity?

    The more substitutes available, the more elastic the demand because consumers can easily switch goods.

  • How does the proportion of income spent on a good affect its elasticity?

    The greater the proportion of income spent, the more elastic the demand, as price changes significantly impact consumers' budgets.

  • How do luxuries and necessities differ in elasticity?

    Luxury goods have elastic demand; necessities have inelastic demand.

  • How does time affect price elasticity of demand?

    Demand is more elastic over longer time periods because consumers have more time to adjust their behavior.

  • What is the relationship between Price Elasticity of Demand and total revenue?

    If demand is elastic, increasing price decreases total revenue; if inelastic, increasing price increases total revenue.

  • How is Price Elasticity of Supply defined?

    Price Elasticity of Supply measures responsiveness of quantity supplied to price changes, calculated as % change in quantity supplied divided by % change in price.

  • What determines whether supply is elastic or inelastic?

    Supply is elastic if Es > 1 (quantity supplied changes more than price), inelastic if Es < 1 (quantity supplied changes less than price), often depending on time to adjust production.

  • What is Income Elasticity of Demand (Ei)?

    Measures responsiveness of quantity demanded to changes in consumer income, calculated as % change in Qd divided by % change in income.

  • What does Ei > 0 indicate about a good?

    The good is normal; demand increases as income increases.

  • What does Ei < 0 indicate about a good?

    The good is inferior; demand decreases as income increases.

  • How to distinguish luxury and necessity goods using income elasticity?

    Luxury goods have Ei > 1; necessity goods have 0 < Ei < 1.

  • What is Cross Price Elasticity of Demand (Epy)?

    Measures responsiveness of quantity demanded of good X to price changes of good Y, calculated as % change in Qd of X divided by % change in price of Y.

  • What does a positive cross price elasticity indicate?

    Goods X and Y are substitutes; if price of Y rises, demand for X rises.

  • What does a negative cross price elasticity indicate?

    Goods X and Y are complements; if price of Y rises, demand for X falls.

  • What does zero cross price elasticity indicate?

    Goods X and Y are unrelated; price changes in Y do not affect demand for X.