Elasticity in Microeconomics

These flashcards cover key concepts related to elasticity in microeconomics, including definitions and explanations.

Price Elasticity of Demand

A measure of how responsive the quantity demanded is to a change in price.

Elastic Demand

Demand is elastic when the absolute value of the percent change in quantity demanded is larger than the percent change in price.

Inelastic Demand

Demand is inelastic when the absolute value of the percent change in quantity demanded is smaller than the percent change in price.

Unit Elastic Demand

Demand where the absolute value of the price elasticity of demand is equal to 1.

Cross-Price Elasticity of Demand

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

Income Elasticity of Demand

A measure of how the quantity demanded changes in response to a change in income.

Perfectly Inelastic Demand

Demand where quantity demanded does not change at all with a change in price.

Perfectly Elastic Demand

Demand where the quantity demanded changes infinitely with any change in price.

Total Revenue

The total amount of money a firm makes from selling its goods, calculated as Price multiplied by Quantity.

Determinants of Price Elasticity of Demand

Factors influencing the elasticity of demand, including the availability of substitutes and whether the good is a necessity or luxury.