elasticity Flashcards
A measure of how responsive one variable is to a change in another variable; calculated as the percentage change
Elasticity = percentage change in quantity/percentage change in price
A measure of how responsive quantity demanded is to a change in price; calculated as the percentage change
price elasticity of demand = percentage change in quantity demanded divided by the percentage change in price
Price elasticity of demand greater than 1 in absolute value; quantity dcemanded that is relatively more responsive to a change in price, such that if price changes by 1% as a result
elastic demand = Ed>1
Price elasticity of demand less than 1 in absolute value; quantity demanded that is relatively less responsive to change in price, such that if price changes by 1%, quantity demanded changes by less than 1% as a result.
inelastic demand = Ed<1
Price elasticity of demand equal to 1 in absolute value; prices and quantities demanded change by equal percentages
Unit-elastic demand = Ed=1
Infinite price elasticity of demand; quantity demanded that is so responsive to a change in price that if price increases or decreases, quantity demanded decreases to 0
perfectly elastic demand
A measure of the effect of a change in the price of one product on the quantity demanded of another
Cross-price elasticity of demand = percentage change in the quantity demanded of one good/by the percentage change n the price of another good
A measure of how responsive demand is to a change in consumer income;
income elasticity of demand = percentage change in the quantity of a good or service demanded/the percentage change in income.
A good for which there is a direct relationship between the demand for the good and income.
Normal good
A good for which there is an inverse relationship between the demand for the good and income.
inferior good
With greater changes in price, the elasticity of demand will be more or less reliable
less
The upper range of a linear demand curve is relatively ______________ elastic
more
A measure of how responsive quantity supplied is to a change in price
price elasticity of supply = percent change in quantity/percent change in price
The time period in which producers cannot increase their use of economic resources to increase quantity supplied
immediate period
The time period in which at least one input of production is fixed but other inputs can be changed
Short run
