Term
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Definition
| measure of how much one thing changes in response to something else changing |
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Term
| price elasticity of demand |
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Definition
| %change of Q^D divided by %change of P (< 0 bc of law of demand) |
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Term
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Definition
for some goods Q^D will change a lot even if price only changes a little;
%changeQ^D > %changeP; greater than 1 |
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Term
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Definition
for other goods Q^D will only change a little even if P changes a lot;
%changeQ^D < %changeP; less than 1 |
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Term
| factors whether elastic or inelastic |
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Definition
~availability of substitute goods, time,% of income spent of the good
ex: more subs. more time and more budget= more elastic demand |
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Term
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Definition
| rise/run= change P/change Q |
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Term
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Definition
| price of good multiplied by quantity sold; ex: we sell 100 units at $10 each. revenue= 100x10=$1000 |
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Term
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Definition
| if demand is "this" and we raise price revenue will decrease; we lower price, revenue will increase |
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Term
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Definition
| if demand is "this" and we raise price revenue will increase; we lower price revenue will decrease |
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Term
| where on the demand curve is the max. revenue? |
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Definition
| point of unitarty elasticity |
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Term
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Definition
| if Q^D only changes a little following a price change; steep slope; goods- gasoline, necess.; steep slope/line |
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Term
| demand is perfectly inelastic.. |
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Definition
| if Q^D does not change at all following a price change; goods- life or death medicine; vertical line |
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Term
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Definition
| if Q^D changes a lot following a price change; goods-has many substitutes; flat slope/line |
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Term
| demand is perfectly elastic.. |
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Definition
| if Q^D changes infinitely following a price change; goods- shares of common stock; horizontal line |
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Term
| income elasticity of demand |
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Definition
| by how much do purchases change following a change in consumer income; greater than 0 normal good; less than 0 inferior good |
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Term
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Definition
| for some goods purchase change alot when income changes; luxury goods, nonessentials |
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Term
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Definition
| for other goods purchases do not change much when income changes; goods-necess., toilet paper |
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Term
| cross-price elasticity of demand |
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Definition
| by how much do your pruchases of one good change foloowing a change in the price of another good |
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