question

Elasticity

answer

The percentage change in one variable divided by the associated percentage change in the other variable

question

Price Elasticity of Demand

answer

The percentage change in quantity demanded divided by the percentage change in price

question

Arc Price Elasticity of Demand

answer

A price elasticity of demand calculated using two distinct price-quantity pairs

question

Arc Price Elasticity

answer

An elasticity that uses the average price and average quantity as the denominator for percentage calculations

question

Point Elasticity

answer

Elasticity evaluated a specific price-quantity combination

question

Linear Demand Curve Function

answer

Q = quantity

a = quantity that is demanded if the price is 0

b = how much the quantity demanded falls if the price is increased by one unit

a = quantity that is demanded if the price is 0

b = how much the quantity demanded falls if the price is increased by one unit

question

Elasticity of demand for a linear demand curve

answer

1. Downward-Sloping

2. Horizontal

3. Vertical

2. Horizontal

3. Vertical

question

What are the three types of linear demand curves?

answer

Varies with price

question

*ε *of a downward-sloping demand curve

answer

-*∞* at every point

question

*ε *of a horizontal demand curve

answer

0 at every point

question

*ε *of a vertical demand curve

answer

Perfectly inelastic (*ε* = 0)

question

The (downward-sloping) demand curve is __________________ __________________ where the demand curve hits the horizontal axis

answer

Perfectly elastic (*ε* approaches -*∞*)

question

The (downward sloping) demand curve is __________________ ______________ where the demand curve hits the vertical axis

answer

Unitary elasticity (*ε* = -1)

question

The (downward-sloping) demand curve has ______________ ____________________ at the midpoint of the demand curve

answer

Horizontal

question

Goods which consumers view as identical often have ____________________ demand curves

answer

Vertical

question

Essential goods have ________________ demand curves

answer

Y = income

question

Income Elasticity of Demand

answer

A good whose quantity demanded increases as income increases

question

Normal Good

answer

A good whose quantity demanded falls as income rises

question

Inferior Good

answer

The percentage change in the quantity demanded divided by the percentage change in the price of another good

question

Cross-Price Elasticity of Demand

answer

Complements

question

If the cross-price elasticity is negative, the goods are ______________________.

answer

Substitutes

question

If the cross-price elasticity is positive, the goods are ______________________.

answer

1. Long run

2. Short run

2. Short run

question

Consumers often substitute between products in the ________ ______, but not in the __________ ______.

answer

The percentage change in quantity supplied divided by the percentage change in price

question

Price Elasticity of Supply

answer

A statistical technique used to estimate the mathematical relationship between a dependent variable and a one or more explanatory variables

question

Regression Analysis

answer

The variable whose variation is to be explained

question

Dependent Variable

answer

The factor(s) that are thought to affect the value of the dependent variable

question

Explanatory Variable(s)

answer

Q = a + bp

a = quantity that is demanded if the price is 0

b = how much the quantity demanded falls if the price is increased by one unit

a = quantity that is demanded if the price is 0

b = how much the quantity demanded falls if the price is increased by one unit

question

Demand Function

answer

p = g + hQ

g = -a/b > 0

h = 1/b < 0

g = -a/b > 0

h = 1/b < 0

question

Inverse Demand Function

answer

1. Dependent

2. Explanatory

2. Explanatory

question

In regression analysis, we put the __________________ variable on the left side of the equation and the ______________________ variable on the right side.

answer

The effects of unobserved influences on the dependent variable that are not included as explanatory variables

question

Random Error Term

answer

The gap between the actual value of the dependent variable and the predicted value

question

Residual

answer

A regression wit two or more explanatory variables

question

Multivariate Regression

answer

...

question

...

answer

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