Interpreting Elasticity

These flashcards cover key vocabulary related to the elasticity of demand and its implications in economic principles.

Elastic Demand

Demand that is sensitive to price changes; a small change in price results in a large change in quantity demanded.

Inelastic Demand

Demand that is not very sensitive to price changes; a change in price results in a small change in quantity demanded.

Unit Elastic Demand

Demand where the percentage change in quantity demanded is equal to the percentage change in price.

Total Revenue

The total value of sales of a good or service, calculated as price multiplied by quantity sold.

Price Elasticity of Demand (PEoD)

A measure of how much the quantity demanded of a good responds to a change in price.

Factors Determining Price Elasticity of Demand

Includes availability of substitutes, necessity vs luxury, share of income, and time.

Quantity Effect of Price

The difference in the number of units sold when the price changes.

Price Effect of Price

The difference in price when demand changes.

Elasticity Along the Demand Curve

Price elasticity of demand may vary along different points of the demand curve.

Curve Shift

A movement of the entire demand curve caused by factors such as income changes or consumer preferences.