1.2.3 Price, Income and Cross Elasticities of Demand

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  • Created by: 13clarken
  • Created on: 09-02-19 10:37
... of demand measures the responsiveness of demand to a change in price. PED= % change of Q/ % change of P
Price elasticity
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... of demand measures the responsiveness of quantity demanded to changes in income. YED= % change in Q/ % change in Y
Income elasticity
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... of demand measures the responsiveness of quantity demanded of one good to changes in price of another good. XED= % change in Sales of A/ % change in price of B
Cross elasticity
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... elasticity of ... measures the responsiveness of quantity supplied to a change in price. PES= % change in quanitity supplied/ % change in P
Price supply
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Factors that affect ... of demand: Necessity, Habit, Alternatives, Purchase frequency, fashion, price compared to income
Price elasticity
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Factors affecting ... of demand: Inflation, Interest rates, type of product and income level
Income elasticity
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Factors affecting the degree of ... of demand: Degree of subtitutability, Degree of complementary and how much of the income the other goods account for
Cross elasticity
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Factors that affect the degree of ... elasticty of ... : Spare production capacity, sticks of available finished goods, ease and cost if acquiring extra resources and the period of production and production speed
Price supply
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...= Price x Total Sales
Total Revenue
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... is when the percentage change in quanitity demanded is smaller than the percentage change in price or demand is not responsive to changes in price
Inelastic Demand
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... is when the percentage change in quantity demanded is greater than the percentage change in price
Elastic Demand
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Perfectly ... demand will have a PED of 0. Demand does not change at all
Inelastic
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Relatively ... demand will have a PED of 0-1. % change in demand < % change in price
Inelastic
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Unitary ... will have a PED of 1. % change in demand = % change in price
Elastic
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Relatively ... demand will have a PED of over 1. % change in demand > % change in price
Elastic
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Perfectly ... demand will have a PED of infinity. Demand changes completely
Elastic
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Total revenue and Elasticity: With ... when price changes demand will change by a bigger percentage- demand is dominant, so total revenue follows quantity demanded
Elastic Demand
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Total revenue and Elasticity: With ... when price changes, demand will change by a smaller percentage- price is dominant, so total revenue follows price
Inelastic Demand
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Other cards in this set

Card 2

Front

... of demand measures the responsiveness of quantity demanded to changes in income. YED= % change in Q/ % change in Y

Back

Income elasticity

Card 3

Front

... of demand measures the responsiveness of quantity demanded of one good to changes in price of another good. XED= % change in Sales of A/ % change in price of B

Back

Preview of the front of card 3

Card 4

Front

... elasticity of ... measures the responsiveness of quantity supplied to a change in price. PES= % change in quanitity supplied/ % change in P

Back

Preview of the front of card 4

Card 5

Front

Factors that affect ... of demand: Necessity, Habit, Alternatives, Purchase frequency, fashion, price compared to income

Back

Preview of the front of card 5
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