ECON 705 LSUS EXAM 3 2026 FINAL REVIEW
PACK COMPLETE QUESTION SET AND CORE
CONCEPT SUMMARY
◉ Definition of market:
More broadly defined - more price ______ Answer: Inelastic
◉ Share of a good in a consumer's budget:
The larger the share - the more ______ Answer: Elastic
◉ Total Expenditure = Total Revenue = Answer: P x Q
◉ If demand is price elastic, then TR ___ as P ___ Answer: Decreases,
Increases
◉ If demand is price inelastic, then TR ___ as P ___ Answer: Increases,
Increases
◉ Which part of the Demand curve represents an elastic demand
(E^pd > 1) Answer: Upper half
,◉ Which part of the Demand curve represents an inelastic demand
(E^pd < 1) Answer: Lower half
◉ Which point on the Demand curve represents Unit Elasticity
(E^pd = 1) Answer: Middle point (Qmax / 2)
◉ When P = $20 / Q = 200
When P = 40 / Q = 160
What happens to Total Expenditure if price increases from $20 to
$40? Answer: Use Midpoint Method
| %∆Qd / %∆P | = 1/3
TE is inelastic (E^pd < 1) so, TE increases as price increase
◉ Income Elasticity of Demand (how quantity demanded responds
to changes in income) Answer: E^id = %∆Qd / %∆I
◉ Inferior Goods (Income equation) Answer: E^id < 0
◉ Normal Goods (Income equation) Answer: E^id > 0
◉ Luxuries are income ______ Answer: Elastic - E^id > 1 (%∆Qd >
%∆I)
,◉ Necessities are income ______ Answer: Inelastic - 0 < E^id < 1
(%∆Qd < %∆I)
◉ Cross-Price Elasticity of Demand equation (how the quantity
demanded of good x responds to changes in the price of good y)
Answer: Exy = %∆Qdx / %∆Py
◉ Cross-Price Elasticity of Demand
Substitutes (equation) Answer: Exy > 0
◉ Substitutes:
If Exy > 0, as the price of good y (Py) ___ as the Quantity demanded
of good x (Qdx) ___ Answer: Increases, Increases
◉ Cross-Price Elasticity of Demand
Complements (equation) Answer: Exy < 0
◉ Complements:
If Exy < 0, as the price of good y (Py) ___ as the Quantity demanded
of good x (Qdx) ___ Answer: Increases, Decreases
◉ When the price of peanut butter fell by 10%, the quantity
demanded of apples rose by 5%. Peanut butter and apples are ______
Answer: Complements
, ◉ Price Elasticity of Supply equation (how responsive quantity
supplied is to changes in price) Answer: E^sp = %∆Qs / %∆P
◉ Law of Supply:
If price (P) ___ then Quantity Supplied (Qs) ___ Answer: Increases,
Increases
◉ Perfectly Elastic Supply (equation) Answer: E^sp = Infinity
◉ Perfectly Inelastic Supply (equation) Answer: E^sp = 0
◉ Elastic Supply (equation) Answer: E^sp > 1
◉ Inelastic Supply (equation) Answer: E^sp < 1
◉ Unit Elastic Supply (equation) Answer: E^sp = 1
◉ The 2 Determinants of the Price Elasticity of Supply Answer: 1.
Availability of Inputs
2. Time
PACK COMPLETE QUESTION SET AND CORE
CONCEPT SUMMARY
◉ Definition of market:
More broadly defined - more price ______ Answer: Inelastic
◉ Share of a good in a consumer's budget:
The larger the share - the more ______ Answer: Elastic
◉ Total Expenditure = Total Revenue = Answer: P x Q
◉ If demand is price elastic, then TR ___ as P ___ Answer: Decreases,
Increases
◉ If demand is price inelastic, then TR ___ as P ___ Answer: Increases,
Increases
◉ Which part of the Demand curve represents an elastic demand
(E^pd > 1) Answer: Upper half
,◉ Which part of the Demand curve represents an inelastic demand
(E^pd < 1) Answer: Lower half
◉ Which point on the Demand curve represents Unit Elasticity
(E^pd = 1) Answer: Middle point (Qmax / 2)
◉ When P = $20 / Q = 200
When P = 40 / Q = 160
What happens to Total Expenditure if price increases from $20 to
$40? Answer: Use Midpoint Method
| %∆Qd / %∆P | = 1/3
TE is inelastic (E^pd < 1) so, TE increases as price increase
◉ Income Elasticity of Demand (how quantity demanded responds
to changes in income) Answer: E^id = %∆Qd / %∆I
◉ Inferior Goods (Income equation) Answer: E^id < 0
◉ Normal Goods (Income equation) Answer: E^id > 0
◉ Luxuries are income ______ Answer: Elastic - E^id > 1 (%∆Qd >
%∆I)
,◉ Necessities are income ______ Answer: Inelastic - 0 < E^id < 1
(%∆Qd < %∆I)
◉ Cross-Price Elasticity of Demand equation (how the quantity
demanded of good x responds to changes in the price of good y)
Answer: Exy = %∆Qdx / %∆Py
◉ Cross-Price Elasticity of Demand
Substitutes (equation) Answer: Exy > 0
◉ Substitutes:
If Exy > 0, as the price of good y (Py) ___ as the Quantity demanded
of good x (Qdx) ___ Answer: Increases, Increases
◉ Cross-Price Elasticity of Demand
Complements (equation) Answer: Exy < 0
◉ Complements:
If Exy < 0, as the price of good y (Py) ___ as the Quantity demanded
of good x (Qdx) ___ Answer: Increases, Decreases
◉ When the price of peanut butter fell by 10%, the quantity
demanded of apples rose by 5%. Peanut butter and apples are ______
Answer: Complements
, ◉ Price Elasticity of Supply equation (how responsive quantity
supplied is to changes in price) Answer: E^sp = %∆Qs / %∆P
◉ Law of Supply:
If price (P) ___ then Quantity Supplied (Qs) ___ Answer: Increases,
Increases
◉ Perfectly Elastic Supply (equation) Answer: E^sp = Infinity
◉ Perfectly Inelastic Supply (equation) Answer: E^sp = 0
◉ Elastic Supply (equation) Answer: E^sp > 1
◉ Inelastic Supply (equation) Answer: E^sp < 1
◉ Unit Elastic Supply (equation) Answer: E^sp = 1
◉ The 2 Determinants of the Price Elasticity of Supply Answer: 1.
Availability of Inputs
2. Time
