Term
| Price Elasticity of Demand |
|
Definition
| -measures how responsive quantity demand (or the consumer) is to a price change |
|
|
Term
| Price Elasticity of Demand Formula |
|
Definition
| %change in QD / %change in P |
|
|
Term
|
Definition
| a change in P leads to a LARGER % change in QD |
|
|
Term
|
Definition
| a change in P leads to a SMALLER % change in QD |
|
|
Term
| The ease of substitution of a good... |
|
Definition
| means that the good is ELASTIC |
|
|
Term
| a perfectly elastic demand curve is... |
|
Definition
| horizontal, and the elasticity equals ∞. |
|
|
Term
| a perfectly inelastic demand curve is... |
|
Definition
| vertical, the QD is the same regardless of P. |
|
|
Term
|
Definition
| % change in QD = % change in the P. |
|
|
Term
|
Definition
| are in general, inelastic |
|
|
Term
|
Definition
|
|
Term
| the more time people have to adapt to a new P change... |
|
Definition
| the greater the elasticity of demand, the more time people have to find suitable substitutes. |
|
|
Term
|
Definition
the P of the good • the Q of the good sold
(P•Q) |
|
|
Term
| if demand of a good is elastic, then TR increases as... |
|
Definition
|
|
Term
| Price Elasticity of Supply |
|
Definition
| measures how responsive the Q sellers are willing to sell is to changes in P, the change in the QS that results from a change in P |
|
|
Term
| Price Elasticity of Supply Formula |
|
Definition
| %change in QS / %change in P |
|
|
Term
| Time is usually critical in... |
|
Definition
| supply elasticities...b/c it is more costly for producers to bring forth and release resources in shorter periods of time. |
|
|
Term
| Elastic Demand and the Law...congress' mistake |
|
Definition
| in 1991, congress overestimated the elasticity of luxury items. They passed a 10% tax on some specific luxury goods thinking they would earn $1.5 billion, in the end they only raised less than $30 million |
|
|
Term
| Government's war on drugs |
|
Definition
-large Q of illegal drugs were seized and traffickers arrested. decreasing the supply of illegal drugs.
-P went up causing more less-severe crimes to occur to make up for the P change. |
|
|
Term
| if recent sharp increases in the price of insulin have had only a small effect on the amount of insulin purchased, then the demand for insulin is... |
|
Definition
|
|
Term
| if the total revenue decreases when the price is raised then the good is said to have... |
|
Definition
| the elasticity of demand that is ELASTIC. |
|
|
