Chapter 4: Elasticity Flashcards
(14 cards)
price elasticity of demand
a units-free measure of responsiveness of the quantity demanded of a good to a change in its price when all other influences on buyers plans remain the same.
perfectly inelastic demand
elasticity equal 0.
demand curve is vertical.
inelastic demand
when the elasticity is less than 1 and greater than 0
unit elastic demand
when the elasticity equals 1
elastic demand
when the elasticity is greater than 1 and less than infinity.
perfectly elastic demand
elasticity equals infinity
demand curve is horizontal.
total revenue
equals the price of the good multiplied by the quantity sold.
PxQ
total revenue test
estimates the price elasticity of demand by noting how a change in price affects the total revenue.
income elasticity of demand
measures the responsiveness of the demand for a good to a change in income, other things remaining the same.
cross elasticity of demand
measures the responsiveness of demand for a good to change in the price of a substitute or complement, other things remaining the same.
elasticity of supply
measures the responsiveness of the quantity supplied to a change in its price when all other influences on selling plans remain the same.
momentary supply
shows the immediate response to a price change.
short-run supply
shows how the quantity supplied responds to a change in price after some of the possible adjustments have been made.
long-run supply
shows the response of the quantity supplied to a price change after all possible adjustments have been made.
