module 4 - elasticity

curves aren't shifting, they're along the line.

total revenue

the total sales of a firm based on a given quantity of goods

marginal revenue

the net revenue a business earns by selling an additional unit of its product

price sensitivity

the degree to which demand changes when the cost of a product or service changed

price insensitivity

used to describe a product or service for which sales remain the same or continue to increase even if the price goes up or down by a large amount

price elasticity demand formula

PE_d = (change in quantity)/(change in price)

inelastic demand

when the price of a good or service goes up, consumers’ buying habits stay about the same, and when the price does down, the consumers’ buying habits also remain unchanged

elastic demand

the change in quantity demanded due to a change in the price is large

unit elastic demand

a demand in which any change in the price of a good leads to an equally proportional change in quantity demanded

horizontal line in elasticity (demand)

perfectly elastic

• infinite responsiveness at specific price

vertical line in elasticity (demand)

perfectly inelastic

• elasticity is 0

short run elasticity

the responsiveness of quantity demanded or supplied to changed in price or other factors over a short period of time, where the production capacity or input factors are fixed

long run elasticity

the responsiveness of demand or supply to changed in price over an extended period, where all factors of production can be adjusted

the market in relation to elasticity

if market is elastic, a tiny change in price results in a large change in sales (and vise versa)

price elasticity supplied formula

PE_s= (change in quantity supplied)/(change in price)

inelastic supply

a market situation in which a change in the price of goods or services does not produce a similar change in supply

elastic supply

the quantity supplied of a good or service changed significantly when its price changes

horizontal line in elasticity (supply)

at one specific price, suppliers are willing to supply any quantity

• perfectly elastic

vertical line in elasticity (supply)

quantity supplied stays the same no matter the price

• elasticity is 0