Define the following terms and explain their importance to the study of economics.
a. price elasticity
b. complements
c. substitutes
d. cross elasticity
e. supply elasticity
What will be an ideal response?
a. Price elasticity is the ratio of the percentage change in quantity demanded to the percentage change in price that brings about the change in quantity demanded. The term is used extensively in economic predictions.b. Two goods are called complements if an increase in the quantity consumed of one increases the quantity demanded of the other, all other factors remaining constant.c. Two goods are called substitutes if an increase in the quantity consumed of one cuts the quantity demanded of the other, all other factors remaining constant.d. Cross elasticity of demand for some good X to a change in the price of another good Y is the ratio of the percentage change in quantity demanded of X to the percentage change in the price of Y that brings about the change in quantity demanded. This is used in antitrust analysis in determining the boundary of a market.e. Supply elasticity is the ratio of the percentage change in quantity supplied to the percentage change in price that brings about the change in quantity supplied. The term is used extensively in economic predictions.
You might also like to view...
Repeated play can change the outcome in sequential games by:
A. reducing the first-mover advantage. B. removing the incentive to cooperate. C. making collusion more probable. D. increasing the incentive to defect.
According to the graph shown, producing 9 units earns profits that are:
A. lower than output of 11 units, and the firm should increase production.
B. higher than output of 11 units, and the firm should decrease production.
C. higher than output of 11 units, and the firm should increase production.
D. lower than output of 11 units, and the firm should decrease production.