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| show | the quantity demanded falls
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| show | Elasticity
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| show | than it does in the short run.
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| show | people drive less, and half arises because they switch to more fuel-efficient cars. Both responses are reflected in the demand curve and its elasticity
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| show | price elasticity of demand
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| The price elasticity of demand for any good measures | show 🗑
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| A good with close substitutes tends to have more elastic demand because it is easier for consumers to switch from that good to others. F | show 🗑
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| show | A small increase in the price of butter, assuming the price of margarine is held fixed, causes the quantity of butter sold to fall by a large amount. By contrast, because eggs are a food without a close substitute, the demand for eggs is less elastic tha
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| show | Necessities versus Luxuries
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| . When the price of a doctor’s visit rises, | show 🗑
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| markets tend to have more elastic demand than broadly defined markets because it is easier to find close substitutes for narrowly defined goods. | show 🗑
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| has a more elastic demand because it is easy to substitute other desserts for ice cream. Vanilla ice cream, an even narrower category, has a very elastic demand because other flavors of ice cream are almost perfect substi-tutes for vanilla. | show 🗑
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| show | Time Horizon
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| show | as the percentage change in the quantity demanded divided by the percentage change in the price.
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| percentage change in quantity will always | show 🗑
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| show | negative numbers
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| we follow the common practice of dropping the minus sign and reporting all price elasticities of demand as | show 🗑
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| all percentage changes are calculated using the | show 🗑
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| show | a price elasticity less than one
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| show | a price elasticity greater than one
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| If demand is unit elastic ________ total revenue remains constant when the price changes | show 🗑
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| . The standard procedure for computing a percentage change is to | show 🗑
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| show | elastic
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| Demand is considered ________ when the elasticity is less than one, which means the quantity moves proportionately less than the price. | show 🗑
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| show | the percentage change in quantity equals the percentage change in price, and demand is said to have unit elasticity. Because the price elasticity of demand measures how much quantity demanded
responds to changes in the price, it is closely related to th
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| the greater the price elasticity of demand | show 🗑
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| f you have trouble keeping straight the terms elastic and inelastic, here’s a memory trick for you: | show 🗑
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| show | total revenue
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| the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold | show 🗑
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| show | P x Q, the price of the good times the quantity of the good sold.
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| : An increase in the price cause | show 🗑
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| . Because demand is elastic | show 🗑
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| the impact of a price change on total revenue (the product of price and quantity) depends on | show 🗑
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| show | constant slope
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| Slope is defined as | show 🗑
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| show | two variables
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| show | not
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| show | the demand schedule in the table and the midpoint method.
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| show | inelastic
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| show | elastic
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| the elasticity is | show 🗑
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| show | the demand curve is inelastic
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| show | the demand curve is elastic
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| show | a $1 price increase and two-unit reduction in quantity demanded constitute a large percentage increase in the price and a small percentage decrease in quantity demanded, resulting in a small elasticity
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| When the price is high and consumers are not buying much | show 🗑
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| show | for instance, demand is inelastic and a price increase to $2 raises total revenue.
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| show | reduces total revenue.
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| show | exactly unit elastic and total revenue is the same at these two prices.
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| show | , but it is not always the case, and it is never the case for a linear demand curve.
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| show | income elasticity of demand
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| show | normal goods
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| show | inferior goods
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| As a family’s income rises, the percent of its income spent on food declines, indicating an income elasticity less than one By contrast, luxuries such as jewelry and recreational goods tend to have large income elasticities because consumers feel that t | show 🗑
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| show | The cross-price elasticity of demand
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| show | the two goods are substitutes or complements
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| show | substitutes
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| An increase in hot dog prices induces people to grill more hamburgers instead. | show 🗑
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| goods that are typically used together, such as computers and software. In this case, the cross-price elasticity is negative, indicating that an increase in the price of computers reduces the quantity of software demanded | show 🗑
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| show | . The price elasticity of supply
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| show | the flexibility of sellers to change the amount of the good they produce. For example, beachfront land has an inelastic supply because it is almost impossible to produce more of it.
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| show | elastic supplies because firms that produce them can run their factories longer in response to higher prices.
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| In most markets, a key determinant of the price elasticity of supply is the | show 🗑
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| Over short periods of time, firms cannot | show 🗑
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| As the elasticity rises, | show 🗑
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| , supply is | show 🗑
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| show | not constant but varies over the sup-ply curve.
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| For low levels of quantity supplied, the elasticity of supply is | show 🗑
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| show | firms begin to reach capacity. Once capacity is fully used, further increases in production require the construction of new plants. To induce firms to incur this extra expense, the price must rise substantially, so supply becomes less elastic.
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| show | the elasticity of supply may be very high at low levels of quantity supplied and very low at high levels of quantity supplied.
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| show | total revenue rises or falls
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| s. When the demand curve is inelastic, | show 🗑
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| This analysis of the market for farm products also explains a seeming paradox of public policy | show 🗑
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| show | farmers as a group receive greater total revenue if they supply a smaller crop to the market.
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| show | how supply and demand can
behave differently in the short run and in the long run
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| In the short run | show 🗑
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| show | inelastic because buying habits do not respond immediately to changes in price
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| producers of oil outside OPEC respond to high prices by | show 🗑
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| in competitive markets, farmers adopt new technologies that will eventually reduce their revenue because | show 🗑
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| Because the demand curve for oil is ________ elastic in the long run, OPEC's reduction in the supply of oil had a ________ impact on the price in the long run than it did in the short run | show 🗑
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| show | Each of these forces increases the amount consumers spend on smartphones if the income elasticity of demand is greater than _________ and the price elasticity of demand is greater than _________
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