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Chapter 5 summary: -The price elasticity of demand measures how intense the quantity demanded responds to changes in the price. -Demands are more elastic if: 1. close substitutes are available 2. good is a luxury rather than a necessity 3. if the market is narrowly defined 4. if buyers have substantial time to react to a price change

-The price elasticity of demand is calculated as the % change in quantity demanded / %change in price. -If the elasticity is less than 1, so that quantity demanded moves proportionately less than the price, demand is said to be inelastic. If the elasticity is greater than 1, so that quantity demanded moves proportionately more than the price, demand is said to be elastic.

-Total revenue is the total amount paid for a good, but also equals the price of the good times quantity sold. -For inelastic demand curves, total revenue rises as price rises. -For elastic demand curves, total revenue falls as price rises.

-The income elasticity of demand measures how intense the quantity demand responds to changes in consumers' income. -The cross-price elasticity of demand measures how much the quantity demanded of one good responds to changes in the price of another good

-The price elasticity of supply measures how intense the quantity supplied responds to changes in the price. -This elasticity often depends on the time horizon under consideration. In most markets, supply is more elastic in the long run than in the short run -The price elasticity of supply is calculated as % of change in quantity supplied divided / % change in price. If the elasticity is less than 1, so that quantity supplied moves proportionately less than the price, supply is said to be inelastic -The tools of supply and demand can be applied in many different kinds of markets.

chapter 5 key concepts elasticity: how intense the quantity demanded or quantity supplied respond to its determinants price elasticity of demand: how much the quantity demanded responds to a change in price total revenue: total amount paid by consumers or received by sellers. Calculated by the equation price of good multiplied by quantity sold income elasticity of demand: how the quantity demanded changes as consumer income changes cross-price elasticity of demand: how the quantity demanded of one good changes as the price of another good changes price elasticity of supply: how much the quantity supplied responds to changes in the price 

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