Microeconomics

elastic demand

A change in price has a relatively large effect on quantity demanded; the % change in quantity demanded exceeds the % change in price; the resulting price elasticity has an absolute value EXCEEDING 1.0.

inelastic demand

A change in price has relatively little effect on quantity demanded; the % change in quantity change in price; the resulting price elasticity has an absolute value LESS than 1.0.

Perfectly elastic supply curve

A horizontal line, which means that any price decrease drops the quantity supplied to zero; the elasticity value in infinite.

Perfectly elastic demand curve

A horizontal line, which means that any price increase would reduce quantity demanded to zero; the elasticity has an absolute value of infinity.

unit-elastic supply curve

A percentage change in price causes an identical percentage change in quantity supplied; depicted by a supply curve that is a straight line from the origin; the elasticity value EQUALS 1.0

elastic supply

A price change has relatively large effect on quantity supplied; the percentage change in quantity supplied exceeds the percentage change in price; the price elasticity of supply EXCEEDS 1.0

inelastic supply

A price change has relatively little effect on quantity supplied; the percentage change in quantity supplied is less than the percentage change in price; the price elasticity of supply is LESS then 1.0

linear demanded curve

A straight-line demand curve; such a demand curve has a constant slope but usually has a varying price elasticity.

Perfectly inelastic supply curve

A vertical line, which means that a price change has no effect on the quantity supplied; the elasticity values is ZERO.

Perfectly inelastic demand curve

A vertical line, which means that any price change has no effect on the quantity demanded; the elasticity value is ZERO.

unit- elastic demand curve

Everywhere along the demand curve, the percentage change in price causes an equal but offsetting percentage change in quantity demanded, so total revenue is unchanged; the elasticity has an absolute value of 1.0.

Price elasticity of demand

Measures how responsive quantity demanded is to a price change

price elasticity of supply

Measures the responsiveness of quantity supplied to a price change; the percentage change in quantity supplied divided by the percentage change in price

price elasticity of supply

Measures the respsonsiveness

total revenue

Price multiplied by quantity demanded at that price

unit-elastic demand

The % change in quantity demanded equals the percentage change in price; the resulting price elasticity has an absolute value of 1.0

Income elasticity of demand

The percentage change in demand divided by the percentage change in consumer income; the value is positive for normal goods and negative for inferior goods.

unit-elastic supply

The percentage change in quantity supplied equals the percentage change in price; the price elasticity of supply EQUALS 1.0.

Cross-price elasticity of demand

The percentage change in the demand of one good divided by the percentage change in the price of another good; its POSITIVE for substitutes, NEGATIVE for complements, and ZERO for unrelated goods.

Constant-elasticity demand curve

The type of demand that exists when price elasticity is the same everywhere along the curve; the elasticity value is unchanged.