Term
| The upward-sloping supply curve represents... |
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Definition
| ...this represents the behavior of SELLERS. p89 |
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Term
| The downward sloping supply curve represents... |
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Definition
| ...this represents the behavior of BUYERS. p89 |
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Term
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Definition
| Measure of how responsive buyers and sellers are to changes in market conditions. p90 |
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Term
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Definition
| states that a fall in the price of a good raises the quantity demanded. p90 |
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Term
| Price elasticity of demand |
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Definition
a measure of how much the quantity demanded of a good responds to a change in the price of that good.
computed as:
the % change in quantity demanded
/
% change in price.
p90 |
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Term
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Definition
| the quantity demanded responds only slightly to changes in price. p90 |
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Term
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Definition
| quantity demanded responds substantially to changes in price. p90 |
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Term
Availability of close substitutes (creates elastic demand)
Necessities (inelastic) + Luxuries (elastic)
Definition of the market (narrower market = greater elasticity)
Time horizon (longer time = greater elasticity) |
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Definition
Factors that determine the price elasticity of demand.
p90-91 |
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Term
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Definition
A better way to calculate % changes and elasticities
Price elasticity of demand=
(Q2-Q1)/[(Q2+Q1)/2]
/
(P2-P1)/([(P2+P1)/2]
p92 |
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Term
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Definition
| The amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold. p93 |
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Term
| Income elasticity of demand |
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Definition
this measures how the quantity demanded changes as consumer income changes. It is calculated as
the percentage change in quantity demanded
/
the percentage change in income.
p99 |
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Term
| Cross-price elasticity of demand |
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Definition
a measure of how much the quantity demanded of one good responds to a change in the price of another good.
computed as
the percentage change in quantity demanded of the first good
/
the percentage change in the price of a second good.
p99 |
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Term
| The price elasticity of supply |
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Definition
a measure of how much the quantity supplied of a good responds to a change in the price of that good.
computed as
the % change in quantity supplied
/
the % change in price
p100
(Further, supply of a good is said to be elastic if the quantity supplied responds only slightly to changes in the price. Supply is said to be inelastic if the quantity supplied responds only slightly to changes in the price.) |
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Term
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Definition
this represents the extreme case of zero elasticity. Supply is perfectly inelastic.
p101 |
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Term
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Definition
| in this instance, supply is perfectly elastic. Elasticity equals infinity. p101 |
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