Chapter 4: Elasticity

These flashcards cover key concepts related to elasticity in economics, including definitions and implications of various types of elasticity.

Price Elasticity of Demand

A measure of the responsiveness of the quantity demanded of a good to a change in its price.

Midpoint Formula

A formula used to calculate price elasticity of demand that provides consistent results, taking averages of price and quantity.

Perfectly Inelastic Demand

Demand that does not change when the price changes; represented by a vertical demand curve.

Unit Elastic Demand

Demand in which the percentage change in quantity demanded is equal to the percentage change in price; elasticity equals 1.

Perfectly Elastic Demand

Demand where any price change results in an infinite change in quantity demanded; represented by a horizontal demand curve.

Cross Elasticity of Demand

A measure of how the quantity demanded for a good responds to a change in the price of a substitute or complement.

Income Elasticity of Demand

A measure of how the quantity demanded of a good responds to a change in consumer income.

Total Revenue Test

A method to estimate the price elasticity of demand by observing changes in total revenue resulting from a price change.

Factors Influencing Price Elasticity of Demand

Includes the closeness of substitutes, the proportion of income spent on the good, and the time elapsed since a price change.

Elasticity of Supply

Measures the responsiveness of the quantity supplied to a change in the price of a good.