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Terms in this set (25)
Price elasticity of demand shows how
Responsive the quantity demanded is to a change in price.
Supply is very elastic when
The quantity supplied has a large increase in response to an increase in price.
Supply is very inelastic when
The quantity supplied changes little when the price increases
Oil and alternative sources of energy such as wind and solar are
Substitute goods
For product X, the price elasticity of demand has an absolute value of 3.5. This means that quantity demanded will increase by
3.5 percent for each 1 percent decrease in price, ceteris paribus.
When demand is elastic, the absolute number for price elasticity will be
Greater than 1
When demand is inelastic
The percentage change in price is greater than the percentage change in quantity demanded.
When the percentage change in quantity demanded is less than the percentage change in price, ceteris paribus
Demand is inelastic
A demand curve that is completely elastic is
Horizontal
The demand will be _______________ if the consumer has _________ substitute goods to choose from
Elastic; more
The basic formula for price elasticity of demand is
The percentage change in quantity demanded divided by the percentage change in price
Demand is more price-elastic
In the long run
If the price elasticity of demand is equal to 2, the good has ___ demand.
Elastic
A price change will have no effect on total revenue if demand is
Unitary elastic
If the demand for cigarettes is inelastic
Total revenue will rise if the price of cigarettes rise
When demand is price-inelastic, ceteris paribus, an increase in
Price leads to greater total revenue
To find the average percentage change in quantity demanded,
The change in quantity demanded is divided by the average quantity
On a demand curve, demand is more elastic
At higher prices
Smart phones and apps are complementary goods. The cross price elasticity of demand between smart phones and apps is expected to be
Negative
If two goods are complementary goods, then
The cross-price elasticity sign will be negative
Income elasticity measures the
Responsiveness of quantity demanded to a percentage change in income
A good is normal if the sign on the income elasticity formula is
Positive
The demand for normal goods
Rises when income rises
If a good is normal, its
income elasticity of demand is positive
If a good is inferior, its
income elasticity of demand is negative
Principles of Microeconomics
7th EditionN. Gregory Mankiw
830 solutions
Principles of Microeconomics
8th EditionN. Gregory Mankiw
796 solutions
Essentials of Economics
2nd EditionPaul Krugman
116 solutions
Macroeconomics
7th EditionN. Gregory Mankiw
213 solutions
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