You are on page 1of 8

What comes to mind? Key words?

1. 2. 3. 4.

Determinants of Price Elasticity of Demand Importance or degree of necessity of the goods Number of available substitutes The proportion of income in price changes The time period

Effect of a change in Price to Revenue The price effect refers to an increase in price that will result to a positive effect on revenue, and vice versa The quantity effect this pertains to an increase in price that will lead less quantity sold, and vice versa If perfectly inelastic, a price increase creates zero total revenue If perfectly inelastic, a price increase will cause total revenue to increase

1.

2.

3.
4.

5.

If the price elasticity for a good is elastic, price increase will make the revenue fall and vice versa If the price elasticity for a good is inelastic, a price increase will give rise to total revenue If the price elasticity is unitary elastic, a change in price will not affect revenue If the price elasticity is perfectly elastic, price increase = zero total revenue If perfectly inelastic, price increase will cause total revenue to increase

= Delta QD / Delta Income Income elasticity measures whether the product is a normal or inferior good. Normal good when its income elasticity is positive Inferior good when income elasticity negative Luxury goods elasticity coefficient is greater than 1 Necessity Goods positive but is less than 1

Simply measures whether a good is a substitute or complementary If the coefficient of cross-price elasticity is positive, its a substitute If negative coefficient, its complementary If coefficient is zero, the products are unrelated

Elastic Supply Inelastic Supply Unitary Supply Perfectly Elastic Supply educational services Perfectly Inelastic Supply a change in price has no effect on quantity supplied

Determine

Monetary or Intermediate Short-run Long-run