2.6 Elasticity Flashcards
Define price elasticity of demand
The responsiveness of a change in demand to a change in price
How do you calculate PED
% change in QD / % change in P
What is it called when a good is very responsive to a change in price
A price elastic good
What is the numerical value for a price elastic good
PED is > 1
What does a relatively elastic demand curve look like
slightly shallower than a 45 degree line
What is it called when a good had a demand that is relatively unresponsive to a change in price
A price inelastic good
What does a relatively inelastic demand curve look like
A slightly steeper than 45 degree line
What is a unitary elastic good
A good that has a change in demand which is equal to the change in price
PED = 1
What does a unitary elastic demand curve look like
A curve from the top of the price axis to the end of the quantity line
What is a perfectly inelastic good
A good that has a demand which does not change when price changes
PED = 0
What does a perfectly inelastic demand curve look like
A vertical line from top to bottom
What is a perfectly elastic good
A good that has a demand which falls to zero when price changes
PED = infinity
What does a perfectly elastic demand curve look like
A horizontal like from left to right
