Economics: Elasticity, Revenue, and Profit, Quizzes of Economics

Download Economics: Elasticity, Revenue, and Profit and more Quizzes Economics in PDF only on Docsity! TERM 1 Elasticity DEFINITION 1 In economics, elasticity is the ratio of the percent change in one variable to the percent change in another variable. TERM 2 Elasticity greater than one Elasticity lower than one DEFINITION 2 Elastic (elasticity greater than one) means that quantity is more price responsive. Inelastic (elasticity less than one) means that quantity is less price responsive. TERM 3 Revenue DEFINITION 3 Revenue = Price x Quantity TERM 4 If demand is inelastic DEFINITION 4 raising the price raises revenue TERM 5 If demand is elastic DEFINITION 5 raising the price lowers revenue TERM 6 Three Factors Determine the Elasticity of DEMAND DEFINITION 6 1.) Substitutes. If there are substitutes available, demand is MORE ELASTIC. 2.) Share of the consumer budget. If good is a big share of budget, then demand is MORE ELASTIC. 3.) Time frame. If the time frame is longer, then demand is MORE ELASTIC. TERM 7 price elasticity of supply DEFINITION 7 How much quantity changes if supply changes by one percent TERM 8 Three Factors of the Elasticity of SUPPLY DEFINITION 8 1.) NOT highly specialized inputs, MORE ELASTIC 2.) Greater mobility of inputs, MORE ELASTIC 3.) Longer the suppliers have to respond to a change in price, MORE ELASTIC TERM 9 Accounting Profit DEFINITION 9 Total Revenue - Total Explicit Cost TERM 10 Economic Profit DEFINITION 10 Total Revenue-Costs-Opportunity Cost TERM 21 In a perfectly competitive industry what kind of demand curve? DEFINITION 21 horizontal demand schedules TERM 22 In an imperfectly competitive industry DEFINITION 22 downward sloping demand schedule TERM 23 A firm has market power IF DEFINITION 23 The demand schedule is inelastic (the less substitutes, the more market power a firm has) TERM 24 Sources of Market Power: DEFINITION 24 patents and copyrights government licenses TERM 25 Economies of Scale DEFINITION 25 constant returns when, if inputs are doubled outputs are doubled