Chapter 6 - Elasticity Flashcards
Price Elasticity of Demand
The ratio of the percent change in quantity demanded to the percent change in price as we move along the demand curve.
(6.1) Percent change in price =
(Change in quantity demanded / Initial quantity demanded) x 100
(6.2) Percent change in price =
(Change in price / Initial Price) x 100
(6.3) Percent elasticity of demand =
( % change in quantity demanded / % change in price)
Perfectly Inelastic demand
The case where there is zero price elasticity of demand
When the price elasticity of demand is infinite, economists say that demand is?
Perfectly elastic
When the price elasticity of demand is greater than 1 economists say that demand is?
elastic
When the price elasticity of demand is less than 1, they say that demand is?
inelastic
What is unit-elastic demand?
when the price elasticity of demand is exactly 1
What is total revenue?
The total value of sales of a good or service
= (Price) x (Quantity Sold)
What is the ratio of the percent change in the quantity demanded of one good to the percent change in the price of the other called?
Cross - price elasticity of demand
= (% change in quantity of A demanded) / (% change in price of B)
(6.8) Income elasticity of demand =
(% change in quantity demanded) / (% change in income)
The demand for a good is income - elastic when?
The income elasticity of demand for that good is greater than 1.
The demand for a good is income - inelastic when?
the income elasticity of demand for that good is positive but less than 1.
Price elasticity of supply
= (% change in quantity supplied) / (% change in price)
