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Elasticity
measures how much Demand (or supply) will change in response to a change in price
Price Elasticity of Demand
percent change in quantity demanded/ percent change in price
elastic demand
quantity demanded responds a lot to change in price, relatively elastic PED > 1
inelastic demand
quantity demanded only responds a little bit to a change in price, relatively inelastic PED < 1
perfectly inelastic demand
quantity demanded does not change when price changes PED = 0
perfectly elastic demand
demand is dependent on price - Price changes = quantity demanded = ZERO
Unit Elastic
assumes a change in price will cause an equal proportional change in quantity demanded.
(PED) = 1
Cross-Price Elasticity of Demand
Measures the effect of the change in one good’s price on the demand of the other good.
Income Elasticity of Demand
Measures how changes in our incomes affect the demand for a good.
total revenue
the total value of sales of a good or service
the production funciton
the relationship between the quantity of inputs a firm uses and the quantity of output it produces.
Variable Input
an input whose quantity the firm can vary at any time
Fixed Input
an input whose quantity cannot be varied for a period of time.
Marginal Analysis
an examination of the additional benefits of an activity compared to the additional costs.
total product
total quantity of output produced
marginal product
additional output produced by 1 more variable output
Average Product
average quantity of output produced by 1 variable input
explicit costs
are costs that requires an outlay of money
implicit costs
are costs that do not involve an outlay of money, instead, it is measured by the value, in dollar terms, of the benefits that are foregone
Note 
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