Chapter 4 - Elasticity

Price elasticity of demand

percentage change in the quantity demanded of a good/service that results from a 1 percent change in its price

Perfectly elastic demand

demand is perfectly elastic with respect to price if price if elasticity of demand is infinite

Perfectly inelastic demand

demand is perfectly inelastic with respect to price if price elasticity of demand is zero

Total daily expenditure on a good

daily number of units bought times the price for which it sells

Total Expenditure = Total Revenue

The dollar amount that consumers spend on a product (P x Q) is equal to the dollar amount that sellers receive

Cross-price elasticity of demand

percentage by which the quantity demanded of the first good changes in response to a 1 percent change in the price of the second

Income elasticity of demand

percentage by which quantity demanded changes in response to a 1 percent change in income

Price elasticity of supply

percentage change in quantity supplied that occurs in response to a 1 percent change in price

Perfectly inelastic supply

supply is perfectly inelastic with respect to price if elasticity is zero

Perfectly elastic supply

supply is perfectly elastic with respect to price if elasticity of supply is infinite

Price elasticity of demand

Percentage change in the quantity demanded of a good/service that results from a 1 percent change in its price

Elastic demand

The demand for good is elastic with respect to price if its price elasticity of demand is greater than 1

Inelastic demand

The demand for a good is inelastic with respect to price if its price elasticity of demand is less than 1 unit

Unit elastic demand

The demand for a good is unit elastic with respect to price if its price elasticity of demand equals 1

Perfectly elastic demand

Demand is perfectly elastic with respect to price if price if elasticity of demand is infinite

Perfectly inelastic demand

Demand is perfectly inelastic with respect to price if price elasticity of demand is zero

Total daily expenditure on a good

Daily number of units bought times the price for which it sells

Total expenditure = Total revenue

The dollar amount that consumers spend on product (P x Q) is equal to the dollar amount that sellers receive

Cross-price elasticity of demand

Percentage by which the quantity demanded of the first good changes in response to a 1 percent change in the price of the second

Income elasticity of demand

Percentage by which quantity demanded changes in response to a 1 percent change in income

Price elasticity of supply

Percentage change in quantity supplied that occurs in response to a 1 percent change in price

Perfectly inelastic supply

Supply is perfectly inelastic with respect to price if elasticity is zero

Perfectly elastic supply

Supply is perfectly elastic with respect to price if elasticity of supply is infinite