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11 terms

Microeconomics chapter 6

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Elasticity
A measure of how much one economic variable responds to changes in another economic variable
Price Elasticity of demand
the responsiveness of the quantity demanded to a change in price, measured by dividing the precentage change in quantity demanded of a product by the percentage change in the product's price
Elastic demand
demand is elastic when the percentage change in quantity demanded is greater than the percentage change in price, so the price elasticity is greater than 1 in absolute value.
inelastic demand
demand is inelastic when when the percentage change in quantity demanded is less than the percentage change in price, so the price elasticity is less than 1 in absolute value.
unit-elastic demand
demand is unit-elastic when the percentage change in quantity demanded is equal to the percentage change in price, so the price elasticity is equal to 1 in absolute value.
perfectly inelastic demand
the case where the quantity demanded is completely unresponsive to price, and the price elasticity of demand equals zero.
perfectly elastic demand
the case where the quantity demanded is infinitely responsive to price, and the price elasticity of demand equals infinity.
total revenue
the total amount of funds received by a seller of a good or service, calculated by multiplying price per unit by the number of units sold.
cross-price elasticity of demand
the percentage change in quantity demanded of one good divided by the percentage change in the price of another good.
income elasticity of demand
a measure of the responsiveness of the quantity demanded to changes in income, measured by the percentage change in quantity demanded divided by the percentage change in income.
price elasticity of supply
the responsiveness of the quantity supplied to a change in price, measured by dividing the percentage change in the quantity supplied of a product by the percentage change in the product's price