# Shared Flashcard Set

## Details

microecon
unit 4
18
Economics
07/07/2010

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