AP Microeconomics Flashcards: Price Elasticity of Demand
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Review key ideas with interactive flashcards. This set includes 14 cards to help you master important concepts.
If demand is elastic, what happens to total revenue when the price is increased?
If demand is elastic (elasticity > 1), an increase in price will cause total revenue to decrease.
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If demand is elastic, what happens to total revenue when the price is increased?
If demand is elastic (elasticity > 1), an increase in price will cause total revenue to decrease.
What does it mean for demand to be 'inelastic'?
Demand is described as being inelastic when the magnitude of the value of elasticity is less than 1.
Explain the relationship between slope and elasticity on a linear demand curve.
Elasticity varies along a linear demand curve, even though the slope is constant; therefore, slope is not the same as elasticity.
What is a key factor that influences the price elasticity of demand?
The price elasticity of demand depends on certain factors, such as the availability of substitutes.
What does it mean for demand to be 'unit elastic'?
Demand is described as being unit elastic when the magnitude of the value of elasticity is equal to 1, where the change in price and quantity demanded are proportional.
What is the general purpose of elasticity in economics?
Economists use elasticity to measure the magnitude of percentage changes in quantity owing to any given changes in the own-price, income, and prices of related goods.
If demand is inelastic, what happens to total revenue when the price is increased?
If demand is inelastic (elasticity < 1), an increase in price will cause total revenue to increase.
If demand is unit elastic, what is the impact of a price change on total revenue?
If demand is unit elastic (elasticity = 1), a change in price will not change the total revenue.
How is the price elasticity of demand measured or calculated?
Price elasticity of demand is measured by the percentage change in quantity demanded divided by the percentage change in price.
What does it mean for demand to be 'elastic'?
Demand is described as being elastic when the magnitude of the value of elasticity is greater than 1.
A movie theater lowers its ticket prices and sees its total revenue from ticket sales increase. What does this imply about the price elasticity of demand for its tickets?
This implies that the demand for the tickets is elastic, because the price decrease led to an increase in total revenue.
In simple terms, what does price elasticity of demand measure?
It measures the responsiveness of the quantity demanded to changes in price.
What numerical value is the benchmark that separates elastic and inelastic demand?
The separating benchmark for the ranges of elasticity of demand is a magnitude of 1.
A city raises the price for public parking and its total revenue from parking increases. What does this imply about the price elasticity of demand for public parking?
This implies that the demand for public parking is inelastic, as the price increase led to an increase in total revenue.