Economics Key Terms: Elasticity, Supply, and Demand

Price elasticity of demand

The ratio of the percent change in the quantity demanded to the percent change in the price as you move along the demand curve (p. 162).

Perfectly inelastic demand

The case where the price elasticity of demand is $0$, meaning the quantity demanded does not respond at all to changes in price; represented by a vertical demand curve (p. 166).

Perfectly elastic demand

The case where the price elasticity of demand is infinite ($\\infty$), meaning any price increase causes quantity demanded to drop to zero; represented by a horizontal demand curve (p. 167).

Elastic demand

Demand for which the price elasticity of demand is greater than $1$ (p. 167).

Inelastic demand

Demand for which the price elasticity of demand is less than $1$ (p. 167).

Unit-elastic demand

Demand for which the price elasticity of demand is exactly equal to $1$ (p. 167).

Income elasticity of demand

The percent change in the quantity of a good demanded when a consumer's income changes divided by the percent change in the consumer's income (p. 175).

Income-elastic demand

Demand for a good where the income elasticity of demand is greater than $1$ (p. 176).

Income-inelastic demand

Demand for a good where the income elasticity of demand is positive but less than $1$ (p. 176).

Price elasticity of supply

A measure of the responsiveness of the quantity of a good supplied to the price of that good, equal to the percent change in quantity supplied divided by the percent change in price (p. 178).

Perfectly inelastic supply

The case where the price elasticity of supply is $0$, so that changes in the price of the good have no effect on the quantity supplied; represented by a vertical supply curve (p. 179).

Perfectly elastic supply

The case where the price elasticity of supply is infinite ($\\infty$), so that any decrease in price causes quantity supplied to fall to zero; represented by a horizontal supply curve (p. 179).

Competitive market

A market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold (p. 68).

Supply and demand model

A model of how a competitive market behaves (p. 68).

Supply schedule

A list or table showing how much of a good or service producers will supply at different prices (p. 69).

Quantity supplied

The actual amount of a good or service producers are willing to sell at some specific price (p. 70).

Supply curve

A graphical representation of the supply schedule, showing the relationship between quantity supplied and price (p. 70).

Shift of the supply curve

A change in the quantity supplied of a good or service at any given price, represented by the change of the original supply curve to a new position (p. 70).

Movement along the supply curve

A change in the quantity supplied of a good arising from a change in the good's price (p. 70).

Input

A good or service that is used to produce another good or service (p. 72).

Individual supply curve

A graphical representation showing the relationship between quantity supplied and price for an individual producer (p. 74).

Quantity demanded

The actual amount of a good or service consumers are willing to buy at some specific price (p. 77).

Demand schedule

A list or table showing how much of a good or service consumers will want to buy at different prices (p. 77).

Demand curve

A graphical representation of the demand schedule, showing the relationship between quantity demanded and price (p. 77).

Law of demand

The principle that a higher price for a good or service, other things being equal, leads people to demand a smaller quantity of that good or service (p. 78).

Shift of the demand curve

A change in the quantity demanded of a good or service at any given price, represented by the change of the original demand curve to a new position (p. 78).

Movement along the demand curve

A change in the quantity demanded of a good that is the result of a change in that good's price (p. 79).

Substitutes

Pairs of goods for which a rise in the price of one good leads to an increase in the demand for the other good (p. 80).

Complements

Pairs of goods for which a rise in the price of one good leads to a decrease in the demand for the other good (p. 81).

Normal good

A good for which a rise in consumer income increases the demand for that good (p. 81).

Inferior good

A good for which a rise in consumer income decreases the demand for that good (p. 81).

Individual demand curve

A graphical representation showing the relationship between quantity demanded and price for an individual consumer (p. 82).

Equilibrium price

The price that matches the quantity supplied and the quantity demanded in a market (p. 85).

Equilibrium quantity