![]() inelastic: suppliers change their production behavior very little in response to drastic change in price calculation: % Change in Quantity Demanded/% Change in Price complements increase in the price of one good leads to a decrease in the demand of the other (or vice versa) substitutes increase in the price of one good leads to an increase in the quantity demanded of the other good (or decrease=decrease) price elasticity of supply measures the responsiveness of suppliers to changes in price calculation measures the sensitivity of the quantity demanded of one good to changes in the price of another good luxuries (jewelry) tend to have large income elasticities bc consumers forgo them if their income falls below certain level cross-price elasticity of demand necessities (food) tend to have lower, positive income elasticities bc consumers purchase them regardless of price goods w negative income elasticity of demand=negative luxury good often viewed as a normal good that has an income elasticity greater than 1 goods w positive income elasticity of demand=normal inferior good when an increase in income leads to a decrease in quantity demanded (or vice versa) calculation= % change in quantity/% change in income normal good when an increase in income equates to an increase in quantity demanded (or a decrease=decrease) ![]() calculation measures how much consumers change the quantity demanded of a good when their income changes true total revenue calculation total revenue= price x quantity sold In general, in order for a price decrease to cause a decrease in total revenue, demand must be: inelastic income elasticity of demand occurs when the percentage change in quantity demanded is greater than the percentage change in price True or False: The value of the price elasticity of demand is not equal to the slope of the demand curve. occurs when the percentage change in quantity demanded is smaller than the percentage change in price when is demand elastic when the price elasticity of demand is greater than 1 When is demand inelastic when the price elasticity of demand is less than 1
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