AP Microeconomics Flashcards: Price Elasticity Of Demand

What this deck covers

This deck focuses on Price Elasticity Of Demand, giving you a quick way to review the definitions, rules, and examples that matter most for AP Microeconomics.

How to use these flashcards

Work through these flashcards in short sessions. Try to answer each prompt before flipping the card, then revisit any cards you miss until the explanation feels automatic.

Flashcard 1: What happens to total revenue when demand is inelastic and price increases?

Answer: Total revenue increases. Higher price with inelastic demand boosts total revenue.

Flashcard 2: How does the proportion of income spent on a good affect elasticity?

Answer: Higher proportion leads to more elastic demand. Larger budget share makes price changes more noticeable.

Flashcard 3: What does it mean if demand is elastic?

Answer: Elastic demand means $|E_d| > 1$. Quantity changes more than proportionally to price.

Flashcard 4: What happens to elasticity as more substitutes become available?

Answer: Elasticity increases. More options make consumers more price-sensitive.

Flashcard 5: What does it mean if demand is elastic?

Answer: Elastic demand means $|E_d| > 1$. Quantity changes more than proportionally to price.

Flashcard 6: What is the elasticity of a luxury good likely to be?

Answer: Elastic. Non-essential goods typically have many substitutes.

Flashcard 7: How does a broader definition of the market affect elasticity?

Answer: It leads to more inelastic demand. Fewer substitutes within broader categories reduce responsiveness.

Flashcard 8: Calculate elasticity: $P_1 = 200$, $P_2 = 220$, $Q_1 = 100$, $Q_2 = 95$.

Answer: $E_d = -0.5$ (inelastic). Using midpoint method: $\frac{(95-100)/(195)}{(220-200)/(420)} = -0.5$.

Flashcard 9: What is perfectly inelastic demand?

Answer: Quantity demanded does not change as price changes. Elasticity equals zero; vertical demand curve.

Flashcard 10: Identify the elasticity if $E_d = 1.5$.

Answer: Demand is elastic. Since $|1.5| > 1$, demand responds strongly to price.

Flashcard 11: Calculate elasticity: Price increases 5%, quantity decreases 2%.

Answer: $E_d = 0.4$ (inelastic). Calculated as $\frac{2\%}{5\%} = 0.4$.

Flashcard 12: Name an example of a good with inelastic demand.

Answer: Essential goods like insulin. Life-saving medicines with no close substitutes.

Flashcard 13: How does necessity affect price elasticity?

Answer: Necessities tend to have inelastic demand. People cannot easily reduce consumption of essentials.

Flashcard 14: What does a perfectly inelastic demand curve look like?

Answer: It is vertical. Straight vertical line showing zero price responsiveness.

Flashcard 15: How does a broader definition of the market affect elasticity?

Answer: It leads to more inelastic demand. Fewer substitutes within broader categories reduce responsiveness.

Flashcard 16: What happens to total revenue when demand is elastic and price decreases?

Answer: Total revenue increases. Lower price with elastic demand boosts total revenue.

Flashcard 17: Find the effect on revenue if demand is unitary elastic and price changes.

Answer: Revenue remains unchanged. Price and quantity effects exactly offset each other.

Flashcard 18: What does it mean if demand is unitary elastic?

Answer: Unitary elastic demand means $|E_d| = 1$. Quantity changes proportionally to price change.

Flashcard 19: Calculate elasticity: $P_1 = 50$, $P_2 = 55$, $Q_1 = 200$, $Q_2 = 180$.

Answer: $E_d = -1.11$ (elastic). Using midpoint method: $\frac{(180-200)/(380)}{(55-50)/(105)} = -1.11$.

Flashcard 20: Is a good with many close substitutes likely to have elastic or inelastic demand?

Answer: Elastic demand. Substitutes make consumers highly price-sensitive.

Flashcard 21: Define price elasticity of demand.

Answer: The responsiveness of quantity demanded to a change in price. Measures how sensitive consumers are to price changes.

Flashcard 22: Why is the price elasticity of demand usually negative?

Answer: Due to the law of demand; price and quantity move in opposite directions. Price and quantity demanded move in opposite directions.

Flashcard 23: Is a good with many close substitutes likely to have elastic or inelastic demand?

Answer: Elastic demand. Substitutes make consumers highly price-sensitive.

Flashcard 24: What does it mean if demand is inelastic?

Answer: Inelastic demand means $|E_d| < 1$. Quantity changes less than proportionally to price.

Flashcard 25: What does a perfectly elastic demand curve look like?

Answer: It is horizontal. Straight horizontal line showing infinite price responsiveness.

Flashcard 26: Define price elasticity of demand.

Answer: The responsiveness of quantity demanded to a change in price. Measures how sensitive consumers are to price changes.

Flashcard 27: Calculate elasticity: Price increases 5%, quantity decreases 2%.

Answer: $E_d = 0.4$ (inelastic). Calculated as $\frac{2\%}{5\%} = 0.4$.

Flashcard 28: What type of demand curve represents perfectly inelastic demand?

Answer: A vertical demand curve. Quantity stays constant regardless of price level.

Flashcard 29: State the midpoint formula for elasticity.

Answer: $E_d = \frac{(Q_2 - Q_1)/(Q_2 + Q_1)}{(P_2 - P_1)/(P_2 + P_1)}$. Uses average values to avoid endpoint bias.

Flashcard 30: How does time horizon affect elasticity?

Answer: Demand is more elastic over longer time horizons. More time allows consumers to find alternatives.

Flashcard 31: Identify the elasticity if $E_d = 1.5$.

Answer: Demand is elastic. Since $|1.5| > 1$, demand responds strongly to price.

Flashcard 32: Name an example of a good with elastic demand.

Answer: Luxury goods like high-end cars. Non-essential items with many substitutes available.

Flashcard 33: What does it mean if demand is inelastic?

Answer: Inelastic demand means $|E_d| < 1$. Quantity changes less than proportionally to price.

Flashcard 34: How does the proportion of income spent on a good affect elasticity?

Answer: Higher proportion leads to more elastic demand. Larger budget share makes price changes more noticeable.

Flashcard 35: What is a determinant of price elasticity of demand?

Answer: Availability of substitutes. More substitutes make demand more responsive to price.

Flashcard 36: What is the elasticity of a necessity likely to be?

Answer: Inelastic. Essential goods typically have few substitutes.

Flashcard 37: What type of demand curve represents perfectly elastic demand?

Answer: A horizontal demand curve. Any price change causes infinite quantity response.

Flashcard 38: Name an example of a good with elastic demand.

Answer: Luxury goods like high-end cars. Non-essential items with many substitutes available.

Flashcard 39: What happens to total revenue when demand is inelastic and price increases?

Answer: Total revenue increases. Higher price with inelastic demand boosts total revenue.

Flashcard 40: What type of demand curve represents perfectly inelastic demand?

Answer: A vertical demand curve. Quantity stays constant regardless of price level.

Flashcard 41: Calculate elasticity: $\%$ change in price = 10%, $\%$ change in quantity = -10%.

Answer: $E_d = -1$ (unitary elastic). Equal percentage changes in opposite directions.

Flashcard 42: What type of demand curve represents perfectly elastic demand?

Answer: A horizontal demand curve. Any price change causes infinite quantity response.

Flashcard 43: Identify the elasticity if $E_d = 0.5$.

Answer: Demand is inelastic. Since $|0.5| < 1$, demand responds weakly to price.

Flashcard 44: What is cross-price elasticity of demand?

Answer: It measures the responsiveness of demand for one good to a price change in another. Shows how demand for good A responds to price of good B.

Flashcard 45: Calculate elasticity: $P_1 = 100$, $P_2 = 90$, $Q_1 = 50$, $Q_2 = 60$.

Answer: $E_d = 2$ (elastic). Using midpoint method: $\frac{(60-50)/(110)}{(90-100)/(190)} = 2$.

Flashcard 46: Identify the elasticity if $E_d = 1$.

Answer: Demand is unitary elastic. Since $|1| = 1$, equal proportional response.

Flashcard 47: Identify the elasticity if $E_d = 0.5$.

Answer: Demand is inelastic. Since $|0.5| < 1$, demand responds weakly to price.

Flashcard 48: What is a determinant of price elasticity of demand?

Answer: Availability of substitutes. More substitutes make demand more responsive to price.

Flashcard 49: What happens to elasticity as more substitutes become available?

Answer: Elasticity increases. More options make consumers more price-sensitive.

Flashcard 50: Find the effect on revenue if demand is elastic and price increases.

Answer: Revenue decreases. Higher price reduces quantity more than proportionally.

Flashcard 51: What is the elasticity of a necessity likely to be?

Answer: Inelastic. Essential goods typically have few substitutes.

Flashcard 52: How does necessity affect price elasticity?

Answer: Necessities tend to have inelastic demand. People cannot easily reduce consumption of essentials.

Flashcard 53: What does a perfectly elastic demand curve look like?

Answer: It is horizontal. Straight horizontal line showing infinite price responsiveness.

Flashcard 54: What does it mean if demand is unitary elastic?

Answer: Unitary elastic demand means $|E_d| = 1$. Quantity changes proportionally to price change.

Flashcard 55: Find the effect on revenue if demand is elastic and price increases.

Answer: Revenue decreases. Higher price reduces quantity more than proportionally.

Flashcard 56: What happens to total revenue when demand is elastic and price decreases?

Answer: Total revenue increases. Lower price with elastic demand boosts total revenue.

Flashcard 57: How does time horizon affect elasticity?

Answer: Demand is more elastic over longer time horizons. More time allows consumers to find alternatives.

Flashcard 58: Calculate elasticity: $P_1 = 50$, $P_2 = 55$, $Q_1 = 200$, $Q_2 = 180$.

Answer: $E_d = -1.11$ (elastic). Using midpoint method: $\frac{(180-200)/(380)}{(55-50)/(105)} = -1.11$.

Flashcard 59: State the midpoint formula for elasticity.

Answer: $E_d = \frac{(Q_2 - Q_1)/(Q_2 + Q_1)}{(P_2 - P_1)/(P_2 + P_1)}$. Uses average values to avoid endpoint bias.

Flashcard 60: What is the elasticity of a luxury good likely to be?

Answer: Elastic. Non-essential goods typically have many substitutes.

Flashcard 61: What is the relationship between elasticity and total revenue?

Answer: Elasticity determines the direction of total revenue change. Elasticity predicts how revenue responds to price changes.

Flashcard 62: Identify the elasticity if $E_d = 1$.

Answer: Demand is unitary elastic. Since $|1| = 1$, equal proportional response.

Flashcard 63: Calculate elasticity: Price decreases 10%, quantity increases 20%.

Answer: $E_d = 2$ (elastic). Calculated as $\frac{20\%}{10\%} = 2$.

Flashcard 64: What is perfectly elastic demand?

Answer: Quantity demanded is infinite at a specific price. Elasticity is infinite; horizontal demand curve.

Flashcard 65: Calculate elasticity: $P_1 = 200$, $P_2 = 220$, $Q_1 = 100$, $Q_2 = 95$.

Answer: $E_d = -0.5$ (inelastic). Using midpoint method: $\frac{(95-100)/(195)}{(220-200)/(420)} = -0.5$.

Flashcard 66: Calculate elasticity: $P_1 = 100$, $P_2 = 90$, $Q_1 = 50$, $Q_2 = 60$.

Answer: $E_d = 2$ (elastic). Using midpoint method: $\frac{(60-50)/(110)}{(90-100)/(190)} = 2$.

Flashcard 67: Calculate elasticity: $\%$ change in price = 10%, $\%$ change in quantity = -10%.

Answer: $E_d = -1$ (unitary elastic). Equal percentage changes in opposite directions.

Flashcard 68: Why is the price elasticity of demand usually negative?

Answer: Due to the law of demand; price and quantity move in opposite directions. Price and quantity demanded move in opposite directions.

Flashcard 69: What is perfectly inelastic demand?

Answer: Quantity demanded does not change as price changes. Elasticity equals zero; vertical demand curve.

Flashcard 70: What is perfectly elastic demand?

Answer: Quantity demanded is infinite at a specific price. Elasticity is infinite; horizontal demand curve.

Flashcard 71: What does a perfectly inelastic demand curve look like?

Answer: It is vertical. Straight vertical line showing zero price responsiveness.

Flashcard 72: Find the effect on revenue if demand is inelastic and price decreases.

Answer: Revenue decreases. Lower price increases quantity less than proportionally.

Flashcard 73: Calculate elasticity: Price decreases 10%, quantity increases 20%.

Answer: $E_d = 2$ (elastic). Calculated as $\frac{20\%}{10\%} = 2$.

Flashcard 74: What is the formula for price elasticity of demand?

Answer: $E_d = \frac{\%\, \text{change in quantity demanded}}{\%\, \text{change in price}}$. Standard formula showing percentage change relationship.

Flashcard 75: Name an example of a good with inelastic demand.

Answer: Essential goods like insulin. Life-saving medicines with no close substitutes.

Flashcard 76: What is the relationship between elasticity and total revenue?

Answer: Elasticity determines the direction of total revenue change. Elasticity predicts how revenue responds to price changes.

Flashcard 77: Find the effect on revenue if demand is inelastic and price decreases.

Answer: Revenue decreases. Lower price increases quantity less than proportionally.

Flashcard 78: Find the effect on revenue if demand is unitary elastic and price changes.

Answer: Revenue remains unchanged. Price and quantity effects exactly offset each other.