# Shared Flashcard Set

## Details

Quiz 3
Elasticity
23
Economics
02/14/2013

Term
 Define Elasticity
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 quanityUnitary = 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 PeriodNo subsititutes Small portion of budget
Term
 What does an ELASTIC demand line look like?
Definition
 [image]
Term
 What does an INELASTIC demand line look like?
Definition
 [image]
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
 Price
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
 Quanity
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
 Good substitute
Term
 If Exy is - 3, what is it?
Definition
 Poor compliment
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
 What does Ed = 4.3 mean?
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
 What does Es=.50 mean?
Definition
 INELASTIC supply line POOR subsititute .5 INCREASE in Quanity Supplied/1% Price INCREASE .5 DECREASE in Quanity Supplied/ 1% Price DECREASE
Term
 What does EY = .03 mean?
Definition
 There is a .03  INCREASE in 1% Income rise (vice/versa)
Term
 What does Exy = 10 mean?
Definition
 cross demand line good substitute change 10% quanityx in response to change 1% pricey
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