Econ quiz review

Elasticity of Demand

This measures how much the quantity demanded of a good responds to a change in its price. If a small price change causes a large change in the quantity demanded, the demand is considered elastic. Conversely, if the quantity demanded changes very little with a price change, the demand is inelastic.

Inelastic

the quantity demanded or supplied is relatively unresponsive to price changes. For example, essential goods like gasoline or insulin often have inelastic demand because people need them regardless of price changes.

Elastic

the quantity demanded or supplied is highly responsive to price changes. Luxury goods or non-essential items often have elastic demand because people can easily reduce consumption if the price increases.

Unit Elastic

This is a situation where the percentage change in quantity demanded or supplied is exactly equal to the percentage change in price. In other words, the elasticity coefficient is equal to one.

Elasticity of Supply

This measures how much the quantity supplied of a good responds to a change in its price. If a small price change causes a large change in the quantity supplied, the supply is considered elastic. Conversely, if the quantity supplied changes very little with a price change, the supply is inelastic.

Deadweight Loss

It represents the total surplus lost by society when the market is not operating at its most efficient level. This inefficiency can occur when the quantity of a good that is bought and sold is below the equilibrium quantity, leading to a loss of potential gains from trade.