Ch 4 - Elasticity Of Demand 

________: as income rises, demand falls (consumers look for more affordable substitutes)

________ leads to fall in demand.

A(n) ________ shows the relationship between demand for a good (x- axis) and income level (y- axis)

________ price elasticity of supply: a measure of how much the quantity supplied of a product changes when there's a change in its price.

measure of the responsiveness of quantity demanded to a price change

price inelastic demand

When a product’s PED is inelastic and the price falls, the firm will face loss in revenue

When the selling price of a product that has an elastic PED is decreased, the revenue increases (they sell more)

Demand becomes less elastic

• Availability of substitutes (too many choices)

• Time

• Luxury

• Proportion of income is spent on a good

measures the extent to which the quantity demanded of a product is affected by an income

as income rises, demand falls (consumers look for more affordable substitutes)

• Increased income = higher demand

• Positive elasticity

• Increased income

• Bigger % increase in demand

• Increase income leads to fall in demand

• Negative elasticity

measure of how much the demand of a product changes when there's a change in the price of another product

XED= ________ demanded of X /% △ in price of product Y.

measure of the responsiveness of quantity demanded to a price change

measures the extent to which the quantity demanded of a product is affected by an income

as income rises, demand falls (consumers look for more affordable substitutes)

perfectly proportional, Ey = 1

consumers income doesnt affect demand on product, Ey = 0

normal good

inferior good

a measure of how much the quantity supplied of a product changes when there's a change in its price

measure of how much the demand of a product changes when there's a change in the price of another product