Chapter 6 Flashcards
(11 cards)
Cross-price elasticity of demand
The percentage change in the quantity demanded of one good divided by the percentage change in the price of another good.
Elastic demand
The case where the percentage change in the quantity demanded is greater than the percentage change in price, so the price elasticity is greater than 1 in absolute value.
Elasticity
A measure of how much one economic variable responds to change in another economic variable.
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.
Inelastic demand
The case where 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.
Perfectly elastic demand
The case where the quantity demanded is infinitely responsive to price and the price elasticity of demand equals infinity
Perfectly inelastic demand
The case where the quantity demanded is completely unresponsive to price and the price elasticity of demand equals zero
Price elasticity of demand
The responsiveness of the quantity demanded to a change in price, measured by dividing the percentage change in the quantity demanded of a product by the percentage change in the product’s price.
Price elasticity of supply
The responsiveness of the quantity supplies 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.
Total revenue
The total amount of funds a seller receives from selling of a good or service, calculated by multiplying price per unit by the number of units sold.
Unit-elastic demand
The case where 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.
