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Terms in this set (66)
A reason that the market may not function well in healthcare is because health services:
Aren't very responsive to price-i.e. the demand curves are steep (inelastic).
The order of the operations used while calculating elasticity is very important. What is the LAST operation that should be performed while calculating elasticity?
Dividing the percentage change in Q by the percentage change in P
The average elasticity for steeper demand curves are _____ elastic than flatter curves because percentage changes in ____ tend to be smaller and percentage changes in _____ tend to be larger.
less; quantity; price
What's the correct equation for elasticity?
You can just substitute Q and then P into the midpoint percent change equation. Elasticity=%ΔQ÷%ΔP=∣(Q2−Q1)(Q2+Q1)/2∣÷∣(P2−P1)(P2+P1)/2∣
Let's say the price goes from $3 to $6 and that Q falls from 15 to 3. Calculate the absolute value of the elasticity using the midpoint formula:
[(Q2-Q1)(Q2+Q1)/2]/[(P2-P1)(P2+P1)/2].
2
What is the percentage change in price when price goes from $15 to $18?
20%
Why is the elasticity of demand always a negative number?
The law of demand
Let's say the demand elasticity for Aaron's scones is |.5|. Then for a 1% increase in prices, there will be a .5% _______in quantity demanded. Demand is ____.
decrease; inelastic
Elasticity is the slope of the demand curve:
false
At the top of the demand curve, demand is ______; as we travel down the demand curve, demand becomes ______.
elastic; inelastic
The reason the elasticity changes along the demand curve is because
Percentage changes between larger numbers are smaller than percentage changes between smaller numbers.
What does the demand curve look like when it's perfectly inelastic?
a vertical line
"Smaller ticket" items tend to be more
inelastic
In the house payment example, going from an interest rate of 5% to 7% means that on a $200,000, you'll pay _________ instead of ________. Because housing is a "big ticket" item, it is __________.
$14,000; $10,000; elastic
More substitutability makes demand ______ elastic.
more
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