Economics: Price elasticity of demand
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8 Terms
Price elasticity of demand
A measure of the extent to which the quantity demanded changes in response to a change in price.
Elastic demand
When the quantity demanded changes by a greater percentage than the change in price.
Perfectly elastic
When a change in price causes a complete change in the quantity demanded.
Inelastic demand
When the quantity demanded changes by a smaller percentage than the change in price.
Perfectly inelastic
When a change in price has no effect on the quantity demanded.
Unitary elastic
When a change in price causes an equal change in the quantity demanded, leaving total revenue unchanged.
Main factor determining elasticity
The availability of close substitutes of the product.
Factors indicating inelastic demand
No close substitutes, small proportion of income, necessity, addictive, purchase cannot be postponed.