Chapter 4 - Elasticity
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10 Terms
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Price elasticity of demand
percentage change in the quantity demanded of a good/service that results from a 1 percent change in its price
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Perfectly elastic demand
demand is perfectly elastic with respect to price if price if elasticity of demand is infinite
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Perfectly inelastic demand
demand is perfectly inelastic with respect to price if price elasticity of demand is zero
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Total daily expenditure on a good
daily number of units bought times the price for which it sells
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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
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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
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Income elasticity of demand
percentage by which quantity demanded changes in response to a 1 percent change in income
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Price elasticity of supply
percentage change in quantity supplied that occurs in response to a 1 percent change in price
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Perfectly inelastic supply
supply is perfectly inelastic with respect to price if elasticity is zero
10
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Perfectly elastic supply
supply is perfectly elastic with respect to price if elasticity of supply is infinite