Chapter 5 - Elasticity of Demand and Supply

Δq

Where ________ is the change in quantity supplied and Δp is the change in price.

percentage change

Because a higher price typically leads to an increase in quantity delivered, the ________ is significant.

negative effect

If the positive effect of increased demand outweighs the ________ of reduced pricing, overall revenue rises.

adjustment phase

The duration of the ________ is one factor of supply elasticity consideration.

inferior goods

The term* income elasticity of demand refers to the* percentage change in demand divided by the percentage change in consumer income; the value is positive for normal goods and negative for ________.

percentage change

Elasticity describes the connection between two quantities: the ________ in the quantity requested and the ________ in price.

Price elasticity of demand

percentage change in quantity demanded/percentage change in price

Total revenue (TR)

(p) multiplied by the quantity demanded (q) at that price

Elasticity formula for supply curve

Δq/(q + q’)/2 ÷ Δp/(p + p’)/2

Elasticity of supply

measures how sensitive producers are to price changes

Income elasticity of demand

 percentage change in demand divided by the percentage change in consumer income; the value is positive for normal goods and negative for inferior goods