Chapter #5: Elasticity and its application

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6 Terms

1
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elasticity

a measure of the responsiveness of the quantity demanded or quantity supplied to a change in one of its determinants

2
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price elasticity of demand

a measure of how much the quantity demanded of a good responds to a change in its price, calculated as the percentage change in quantity demanded divided by the percentage change in price

3
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total revenue

the amount paid by buyers and received by the sellers of a good, calculated as the price of the good times the quantity sold

4
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income elasticity of demand

a measure of how much the quantity demanded of a good responds to a change in consumers’ income, calculated as the percentage change in quantity demanded divided by the percentage change in income

5
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cross-price elasticity of demand

a measure of how much the quantity demanded of one good responds to a change in the price of another good, calculated as the percentage change in the quantity demanded of the first good divided by the percentage change in the price of the second good

6
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price elasticity of supply

a measure of how much the quantity supplied of a good responds to a change in its price, calculated as the percentage change in quantity supplied divided by the percentage change in price