Economics - Price Elasticity of Demand

Flashcards covering key vocabulary related to Price Elasticity of Demand as discussed in the economics lecture.

Price Elasticity of Demand (PED)

Measures the responsiveness of quantity demanded to a change in price.

Law of Demand

States that when the price of a good falls, the quantity demanded increases, and when the price rises, the quantity demanded decreases.

Elastic Demand

Demand is elastic when a price change causes a proportionately larger change in the quantity demanded.

Inelastic Demand

Demand is inelastic when a price change causes a proportionately smaller change in the quantity demanded.

Unit Elastic Demand

Demand is unit elastic when the quantity demanded changes by the same proportion as the price.

Total Expenditure (TE)

The total amount spent on a good, calculated as price times quantity purchased.

Factors Influencing Price Elasticity

Includes factors like the proportion of income spent, availability of substitutes, and whether the product is a necessity or luxury.

Shift of the Demand Curve

Occurs when a change in conditions other than price causes demand to increase or decrease.

Movement Along the Demand Curve

Occurs due to a change in the price of the product, resulting in a change in quantity demanded.

Contraction of Demand

A decrease in quantity demanded resulting from an increase in price,

Extension of Demand

An increase in quantity demanded resulting from a decrease in price.