# Shared Flashcard Set

ch 5
elasticity
24
Economics
10/25/2008

## Additional Economics Flashcards

Term
 Elasticity is:
Definition
 A measure of responsiveness to changes in prices or income.
Term
 The importance of the Price Elasticity of Demand is:
Definition
 The measure of the responsiveness of DEMAND to income.
Term
 The significance of the Price Elasticity of Supply is a measure of:
Definition
 The responsiveness of the quantity supplied to price.
Term
 Income Elasticity of Demand is:
Definition
 A measure of the responsiveness of demand to income.
Term
 The Price Elasticity of Supply measures:
Definition
 The responsiveness of the quantity supplied to price.
Term
 Incidence tax measures:
Definition
 who bears its burden.
Term
 The Price Elasticity of Demand is the ratio of the:
Definition
 Percentage in the quantity demanded to the percent change in the price (as we move along the demand curve).
Term
 The midpoint method is a technique for calculating:
Definition
 the percent change.
Term
 The Price Elasticity of demand is equal to the percent change in the quantity demanded divided by:
Definition
 The percent change in the price as you move along the demand curve.
Term
 PErcent changes are best measured using the _________ method.
Definition
 midpoint.
Term
 The midpoint (method) is calculated by:
Definition
 Quantity demanded divided by the percent change in the price.
Term
 Demand is Perfectly ELASTIC when:
Definition
 Any price increase will cause the quantity demanded to drop to zero.
Term
 When demand is perfectly inelastic, the demand curve is a _________ line.
Definition
 vertical.
Term
 Demand is Perfectly ELASTIC when any price increase will cause the:
Definition
 Quantity demanded to drop to zero.
Term
 When demand is perfectly ELASTIC, the demand curve is a ____________ line.
Definition
 Horizontal.
Term
 Demand is ELASTIC if:
Definition
 The price elasticity of demand is GREATER than 1. A fall in price increases total revenue.
Term
 Demand is inelastic if:
Definition
 The price elasticity of demand is less than 1. A fall in price reduces total revenue.
Term
 Demand is unit-elastic if:
Definition
 The price elasticity of demans is exactly 1. A fall in price has no effect on total revenue.
Term
 The Total Revenue is:
Definition
 The total value of sales of a good or service.
Term
 Total revenue is equal to:
Definition
 The price multiplied by the quantity sold.
Term
 When a seller raises the price of a good, two countervailing effects are present:
Definition
 Price and Quantity Effect.
Term
 Price Effect is:
Definition
 After a price increase, each unit solf sells at a higher price, which tends to raise revenue.
Term
 A Quantity Effect is:
Definition
 After a price increase, fewer units are sold, which tends to LOWER revenue.
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