24 terms

The price elasticity of demand measures ___.

how responsive or sensitive consumers are to a change in price

What are the three types of elasticity of demand?

elastic, inelastic, unitary

What is when the consumers are relatively responsive to a change in price and the percentage change of quantity demanded is greater than the percentage change in price?

elastic: price elasticity of demand

What is when the consumers are relatively unresponsive to a change in price and the percentage change in quantity demanded is less than the percentage change in price?

inelastic: price elasticity of demand

What is when the consumer's demand is equal to the percentage change in price?

unitary: price elasticity of demand

What is when consumers are completely unresponsive to a price change and the equity demanded equals zero?

perfectly inelastic

What is when consumers are completely responsive to a price change and firms can sell as much as it wants at a constant price? The equity demanded is infinite.

perfectly elastic

The total revenue method states that if demand price is elastic, then price and total revenue move in the ______ direction.

opposite

The total revenue method states that if demand price is inelastic, then price and total revenue move in the ______ direction.

same

The total revenue method states that if demand price is unitary, then a change in price ______ total revenue.

does not change

What are the determinants of price elasticity of demand?

proportion (%) of consumers income or budget spend on a product, number of close substitutes available, type of product, amount of time consumer has to adjust to price change

What measures how responsive or sensitive producers are to a change in price?

price elasticity of supply

What is when producers are relatively responsive to a change in price and the quantity supplied is greater than zero?

elastic: price elasticity of supply

What is when producers are relatively unresponsive to a change in price and the quantity supplied is less than zero?

inelastic: price elasticity of supply

What is when the percentage change in quantity supplied is equal to the percentage change in price?

unitary: price elasticity of supply

What is when the producer is completely responsive to a price change, and the supply curve is parallel to the quantity axis?

perfectly elastic: supply

What is when the producer is completely unresponsive to a price change, and the supply curve is parallel to to the price axis?

perfectly inelastic: supply

What is the determinant of price elasticity of supply?

The amount of time producers have to adjust resources in response to price change. The longer the time period, the greater the price elasticity of supply.

What measures how responsive or sensitive consumers are to change in money income?

income elasticity of demand

In income elasticity of demand, if the coefficient of the income elasticity of demand is positive, then the good is ____.

normal

In income elasticity of demand, if the coefficient of the income elasticity of demand is negative, then the good is ____.

inferior

What measures how responsive or sensitive quantity demanded of specif product is to a change in the price of some other product?

cross-price elasticity of demand

If the coefficient of the cross-price elasticity of demand is positive, then the two goods are ___.

substitutes

If the coefficient of the cross-price elasticity of demand is negative, then the two goods are ___.

compliments (inferior goods)