mid term 2 e

Elasticity

a measure of the responsiveness of quantity demanded of quantity supplied to one of its determinants.

Price Elasticity of Demand

a measure of how much the quantitiy demanded of a good responds to a change in the price of that good, computed as teh percentage change in quantity demanded divided by the percentage change in price.

Total Revenue

the amount paid by buyers and recieved by sellers of a good, computed as the price of the good times the quanntity sold.

Income Elasticity of Demand

a measure of how much the quantity demanded of a good responds to a change in consumers' income, computed as the percentage change in quantity demanded divided by the percentage change in income.

Price Elasticity of Supply

a measure of how much the quantity supplied of a good responds to a cange in the price of that good, computed as the percentage change in quantity supplied divided by the percentage change in the price.

Summary

- the price elasticity of demand measures how much the quantity demanded responds to changes in the price.
- Demand tends to be more elastic if close substitutes are avaliable, if the good is a luxury rather than a necessity,if the market is narrowly defined, or if buyers have substantial time to react to a price change.

-The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.
- If the elasticity is less than 1, so that quantity demanded moves proportionatley less tahn the price, demanded moves proportionately less tahn the price, demand is said to be inelastic.
- If the elasticity is greater than 1, so that quantity demanded moves proportionatley more than the price, demand is said to be elastic.

-Total revenue, the total amount paid for a good, equals the price of the good times the quantity sold.
- For inelastic demand curves, total revenue rises as price rises.
- For elstic demand curves, total revenue falls as price rises.

-The income elasticity of demand measures how much the quantity demanded responds to changes in consumers' income.
- The cross-price elasticity of demand measures how much the quantity demanded of one geood responds to changes in the price of another good.

-The price elasticity of supply measures how much the quantity supplied responds to changes in the price.
-This elasticity often depends on the time horizon under consideration.
- In most markets, supply is mor elastic in th elong run than in the short run.

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price.
-If the elasticity is less than 1, so that quantity supplied moves proportionately less than price, supply is said to be inelastic.
-If the elasticity is greater than 1, so that quantity supplied moves proprotionatley more than the price, supply is said to be elastic.

-The tools of supply and demand can be applied in many different kinds of markets.
-This chapter uses them to analyze the market for wheat, the market for oil, and the relationship of drug interdiction and the amound of drug related crime.

Define the price of elasticity of demand and the income elasticity demand.

-measures how much the quantity demanded responds to changes in the consumer's income.

List and explain some of the determinants of the price elaticity of demand.

-income
-subsitutes
-compliments.

If the elasticity is greater than 1, is demand elastic or inelastic? If the elasticity equals 0, is demanded perfectly elastic or perfectly inelastic?

-Demand is elastic.
-perfectly inelastic.