Price Elasticity of demand

Definiton of Market

Narrow = Elastic
Broad =Inelastic

Elastic demand curve

small price change, Big quantity change

Elasticity equation

% change in quantity demanded / % change in price

Equal to 1

unit elastic

Greater than 1

elastic

habit-forming

Inelastic demand

Inelsatic demand

small price change, small quantity change

Less than 1

inelastic

Luxury vs. Necessity

Luxury=elastic
Necessity=inelastic

Opposite directions

elastic

Perfectly elastic

undefined change

perfectly inelastic

0

Porportion of income

Big % of income = Elastic
Small % Income =Inelastic

price elasticity of demand

a measure of the sensitivity of demand to changes in price

Same direction

inelastic

substitutability

More substitues = Elastic
Less substitues = Inelastic

Time Horizon

More Time = Elastic
Little Time = Inelastic

Total revenue

the total amount of money a firm receives by selling goods or services (Q+P=TR)

unit elastic

when the percentage change in price and quantity demanded are the same