Economics 4
- Created by: Gabrielle
- Created on: 29-12-13 16:51
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- Elasticity
- Elasticity of Supply
- How much the quantity supplied responds to changes in the price
- Inelastic: supply isn’t very responsive to changes in price
- Closer to zero = more inelastic
- Elastic: supply is responsive to changes in price
- Closer to infinity = more elastic
- Determinants
- Mobility of factors of production
- Time Period (long or short run)
- Size of firm
- Formula: % change in quantity supplied divided by the % change in price
- Elasticity of Demand
- Measures how quantity demanded responds to changes in the price
- Inelastic: demand isn’t very responsive to changes in price
- Closer to zero = more inelastic
- Elastic: demand is responsive to changes in price
- Closer to infinity = more elastic
- Determinants
- Availability of close substitutes
- Necessities vs Luxuries
- Definition of the market
- Proportion of income devoted to product
- Formula: % change in quantity demanded divided by the % change in price
- Income elasticity of demand
- How quantity demanded changes as consumer income changes
- % change in quantity demanded divided by % change in income
- How quantity demanded changes as consumer income changes
- Cross-price elasticity of demand
- How quantity demanded of one good changes as the price of another good changes
- % change in quantity demanded of good 1 divided by the % change in the price of good 2
- How quantity demanded of one good changes as the price of another good changes
- Elasticity of Supply
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