Chapter 19: Demand and Supply Elasticity
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These flashcards cover key concepts related to price elasticity of demand, factors influencing elasticity, and revenue implications.
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10 Terms
Price Elasticity of Demand
The responsiveness of quantity demanded of a commodity to changes in its price.
Elastic Demand
The percentage change in quantity demanded is larger than the percentage change in price.
Inelastic Demand
The percentage change in quantity demanded is smaller than the percentage change in price.
Unit Elasticity of Demand
The percentage change in quantity demanded is equal to the percentage change in price.
Cross Price Elasticity of Demand
The percentage change in the demand for one good divided by the percentage change in the price of a related good.
Income Elasticity of Demand
The percentage change in demand for any good divided by the percentage change in income.
Determinants of Price Elasticity of Demand
Factors that influence the price elasticity of demand, including availability of substitutes and share of the budget spent on the good.
Total Revenue
The total receipts a firm receives from selling its goods or services, calculated as price times quantity sold.
Perfectly Inelastic Demand
A demand condition where the quantity demanded does not change regardless of price changes.
Perfectly Elastic Demand
A demand condition where quantity demanded is infinitely responsive to price changes, represented as a horizontal demand curve.