Term
|
Definition
| Responsiveness of one variable to CHANGES in another variable |
|
|
Term
| List the four elasticity estimates. Explain each |
|
Definition
DEMAND - responsiveness of Qd to changes in PRICE
SUPPLY - responsiveness of Qs to changes in PRICE
CROSS - responsiveness of Qx to changes in PRICE of Y
INCOME - responsiveness of Qx to changes in INCOME
|
|
|
Term
| Graphically illustrate and explain the relationships among price, quantity, and total revenue. |
|
Definition
Elastic = High price/low quanity
Unitary = even price/quanity = best TR
Inelastic = Low price/high quanity |
|
|
Term
| What are the reasons for relatively elastic demand? |
|
Definition
Relative elastic
REASONS:
Close substituions
Luxuary
Large Portion of Budget
Long Time Period |
|
|
Term
| What are the reasons for relatively INELASTIC demand? |
|
Definition
INELASTIC
Reasons:
Necessity
Short Time Period
No subsititutes
Small portion of budget |
|
|
Term
| What does an ELASTIC demand line look like? |
|
Definition
|
|
Term
| What does an INELASTIC demand line look like? |
|
Definition
|
|
Term
| Whats the formula for a DEMAND elasticity? |
|
Definition
Ed = ((q1-q2)/(q1+q2))/((p1-p2)/(p1+p2)) |
|
|
Term
| What is the formula for SUPPLY demand? |
|
Definition
| Es = % change in Qx / % change in Px |
|
|
Term
| If Es > 1, which axis will it pass through? |
|
Definition
|
|
Term
| If Es = 1, which axis will it pass through? |
|
Definition
| Orgin (regardless of slope) |
|
|
Term
| If Ex < 1, what axis will it pass through? |
|
Definition
|
|
Term
| What is the formula for Cross Elasticity? |
|
Definition
| Exy = % change in Qx to change in Py |
|
|
Term
If Exy is 25, what is it? |
|
Definition
|
|
Term
| If Exy is - 3, what is it? |
|
Definition
|
|
Term
| If Ed > 1, what does that mean? |
|
Definition
| decrease in price will increase total revenue (vice versa) |
|
|
Term
| If Ed < 1, what does it mean? |
|
Definition
| decrease in price will decrease total revenue (vice versa) |
|
|
Term
| If Ed = 1, what does it mean? |
|
Definition
| unitary, total revenue at a maximum |
|
|
Term
| What does Exy = -25 mean? |
|
Definition
| That it is a cross demand line that has a GOOD compliment. |
|
|
Term
|
Definition
The line is ELASTIC
4.3% Quanity Demanded/1% price change.
1% price change UP, there will be a 4.3% DOWN.
1% price change DOWN, there will be a 4.3% UP. |
|
|
Term
|
Definition
INELASTIC supply line
POOR subsititute
.5 INCREASE in Quanity Supplied/1% Price INCREASE
.5 DECREASE in Quanity Supplied/ 1% Price DECREASE |
|
|
Term
|
Definition
There is a .03 INCREASE in 1% Income rise (vice/versa)
|
|
|
Term
|
Definition
cross demand line
good substitute
change 10% quanityx in response to change 1% pricey |
|
|
