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Related Flashcards
Cards In This Set
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A measure of the responsiveness of the quantity of a product demanded by consumers when the product price changes
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Price elasticity of demand
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What is the formula for measuring elasticity?
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(Change in quantity demanded / original) / (Change in price / original)
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Product demand for which price changes cause relatively larger changes in quantity demanded
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Elastic demand
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Product demand for which price changes cause relatively smaller changes in quantity demanded
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Inelastic demand
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Product demand for which relative price changes and changes in quantity demanded are equal
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Unit elasticity
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Product demand for which quantity demanded does not respond to a change in price
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Perfectly inelastic demand
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The total number of dollars received by a firm from the sale of a product in a particular period
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Total revenue
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A test that determines elasticity by examining what happens to total revenue when price changes
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Total-revenue test
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A measure of the responsiveness of the quantity of a product demanded to changes in consumer income
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Income elasticity of demand
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A measure of the responsiveness of the quantity demanded of one product to a change in the price of another product
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Cross-elasticity of demand
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If a manufacturing firm lowers its price by 3% why does its revenue has decreased?
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Demand elasticity is less than one
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Is demand elastic or inelastic if the reduction of the price increase revenue?
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Elastic
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When using the total revenue test, if total revenue changes in the same direction of price, is demand elastic or inelastic?
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Inelastic
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Is demand elastic or inelastic the longer the time period under consideration for a product?
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Elastic
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What does a positive cross-elasticity of demand for two products indicate?
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They are substitutes
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