{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter 5 Study Guide

Chapter 5 Study Guide - Income-Elastic If the income...

This preview shows page 1. Sign up to view the full content.

Chapter 5 Study Guide Key Terms Perfectly Inelastic: When the quantity demanded does not respond at all to changes in the price. When the demand is perfectly inelastic, the demand curve is a vertical line. Perfectly Elastic: When any price increase will cause the quantity demanded to drop to zero. When demand is perfectly elastic, the demand curve is a horizontal line. Elastic: If the price elasticity of demand is greater than one. Inelastic: If the price elasticity of demand is less than one. Unit-Elastic : If the price elasticity is exactly one. Total Revenue: The total value of sales of a good or service. It is equal to the price multiplied by the quantity sold. Cross-Price Elasticity of Demand: Measures the effect of change in one good’s price on the quantity demanded of the other good. It is equal to the percent change in the quantity demanded of one good divided by the percent change in the other good’s price.
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Income-Elastic: If the income elasticity of demand for that good is greater than one. Income-Inelastic: If the income elasticity of a demand for that good is less than one. Price Elasticity of Supply: is a measure of the responsiveness of the quantity of a good supplied to the price of that good. It is the ratio of the percent change in the quantity supplied to the percent change in the price as we move along the supply curve. Perfectly Inelastic Supply: When the price elasticity of supply is zero, so that the changes in the price of the good have no effect on the quantity supplied. Perfectly Elastic Supply: when even a tiny increase or reduction in the price will lead to very large changes in the quantity supplied, so that the price elasticity of supply is infinite....
View Full Document

{[ snackBarMessage ]}