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Elasticity

QuestionAnswer
Define Elasticity A measure of the responsiveness of the quantity demanded of a good in relation to price changes
What is price elasticity of demand? A measure of the percentage change in the quantity demanded for a good caused by a percentage change in its price
What makes a good relatively elastic? When the percentage change in quantity demanded is greater that the percentage change in price
What makes a good perfectly elastic? When any increase in price results in quantity demanded dropping to zero
What makes a good unitary elastic? When the percentage change in quantity demanded equals the percentage change in price
What makes a good relatively inelastic? When the percentage change in quantity is less than the percentage change in price
What makes a good perfectly inelastic? If the percentage change in price causes no change in quantity demanded
What kind of PED value does a good that obeys the law of demand have? Negative
What kind of PED value does a giften good have? Positive
Name 5 factors that affect PED The availability of close substitutes. The price of complementary goods. Whether it is essential. The percentage of income spent on it. Durability.
Expectations of future price changes. Length of time allowed for adjustment. Brand loyalty. Alternate uses.
Define Elasticity A measure of the responsiveness of the quantity demanded of a good in relation to price changes
What is price elasticity of demand? A measure of the percentage change in the quantity demanded for a good caused by a percentage change in its price
What makes a good relatively elastic? When the percentage change in quantity demanded is greater that the percentage change in price
What makes a good perfectly elastic? When any increase in price results in quantity demanded dropping to zero
What makes a good unitary elastic? When the percentage change in quantity demanded equals the percentage change in price
What makes a good relatively inelastic? When the percentage change in quantity is less than the percentage change in price
What makes a good perfectly inelastic? If the percentage change in price causes no change in quantity demanded
What kind of PED value does a good that obeys the law of demand have? Negative
What kind of PED value does a giften good have? Positive
Name 5 factors that affect PED The availability of close substitutes. The price of complementary goods. Whether it is essential. The percentage of income spent on it. Durability.
Name 4 more factors that affect PED Expectations of future price changes. Length of time allowed for adjustment. Brand loyalty. Alternate uses.
Define cross elasticity of demand The percentage change in quantity demanded for a good cause by the percentage change of the price of another good
What kind of CED value would a substitute good have? Positive
What kind of CED value would a complementary good have? Negative
Define income elasticity of demand The percentage change in the quantity demanded of a good caused by a percentage change in consumer income
What kind of YED value would a normal good have? Positive
What kind of YED value would an inferior good have? Negative
What would a YED value of zero indicate? Goods that do not change in demand based on income
Define Price elasticity of supply. The measure of the relationship between market price and quantity supplied
Name 4 factors that affect elasticity of supply Firms capacity. Mobility of factors of production. Time period. Nature of the product
Name 4 factors that affect elasticity of supply Storage costs. Cost conditions. Products in joint supply. Stock.
What YED value would a necessity have? <1
Created by: JackEatonK98
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