Elasticity

These flashcards cover key vocabulary terms related to elasticity, including definitions and concepts from the lecture notes.

Price Elasticity of Demand

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

Perfectly Inelastic Demand

When the quantity demanded does not change as the price changes, resulting in a price elasticity of demand of zero.

Unit Elastic Demand

When the percentage change in quantity demanded equals the percentage change in price, yielding a price elasticity of demand of 1.

Perfectly Elastic Demand

When the quantity demanded changes infinitely with the slightest change in price, resulting in infinite price elasticity.

Midpoint Formula

A method to calculate elasticity that uses the average of the initial and new prices and quantities to ensure consistent results.

Total Revenue Test

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

Cross Elasticity of Demand

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

Income Elasticity of Demand

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

Inelastic Demand

When the quantity demanded changes by a smaller percentage than the percentage change in price, resulting in elasticity less than 1.

Elastic Demand

When the quantity demanded changes by a larger percentage than the percentage change in price, resulting in elasticity greater than 1.