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the percentage change in one variable in relation to the percentage change in another variale
Elasticity
measures the percentage change in quantity with respect to the percentage change in price
Price Elasticity
Categories of price elasticity
Price elasticity of demand
Price elasticity of supply
measures the response of quantity demanded with respect to its price
Price elasticity of demand
measures the responsiveness of quantity supplied in response to the percentage change in the price of goods and services
Price elasticity of supply
Two ways of calculating the price elasticity of demand
Point elasticity
Arc elasticity
measures the elasticity at a particular point
Point elasticity
Measures the elasticity between two points
Arc elasticity
Categories of price elasticity of demand
price elastic demand
price inelastic demand
unitary elastic demand
perfectly elastic demand
perfectly inelastic demand
the value of price elasticity coefficient is greater than one
price elastic demand
the value of price elasticity coefficient is less than one
price inelastic demand
elasticity coefficient is equal to one
unitary elastic demand
coefficient equals infinity
perfectly elastic demand
elasticity coefficient equals zero
perfectly inelastic demand
Determinants of price elasticity of demand
Importance or degree of necessity of the goods or services
Number of available substitute
The proportion of income in price changes
The time period
Categories of price elasticity of supply
Price elastic supply
price inelastic supply
unitary elastic supply
perfectly elastic supply
perfectly inelastic supply
change in price leads to a greater change in quantity supplied
price elastic supply
a change in price leads to a lesser change in quantity supplied
price inelastic supply
change in price leads to an equal change in quantity supplied
unitary elastic supply
occurs when there is no change in price and there is an infinite change in quantity supplied
perfectly elastic supply
occurs when a change in price has no effect on quantity supplied
perfectly inelastic supply
primary determinant of price elasticity of supply
Time period
Classification of time period
Monetary or intermediate
Short-run
Long-run
the responsiveness of quantity demanded in response to a change in income
income elasticity of demand
income elasticity is positive
normal good
income elasticity is negative
inferior good
normal goods with income elasticity is greater than one
luxury goods
measures the responsiveness of quantity demanded of a certain goods or service to a change in price of another good or service
cross elasticity of demand
measures whether the good is a substitute or a complementary
Cross elasticity of demand
goods that are used in conjunction with other goods
Complementary goods
goods that can be used in place of another
Substitute goods
Author
Mingming
ID
280445
Card Set
Chapter 5
Description
omg
Updated
2014-08-10T06:02:53Z
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