Microeconomics Ch. 5
elastic demand
A change in price has a relatively large effect on quantity demanded; the percentage change in quantity demanded exceeds the percentage change in price; the resulting price elasticity has an absolute value exceeding 1.0
elastic supply
A change in price has a 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 demand
A change in price has relatively little effect on quantity demanded; the percentage change in quantity demanded is less than the percentage change in price; the resulting price elasticity has an absolute value less than 1.0
inelastic supply
A change in price 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 than 1.0
perfectly elastic supply curve
A horizontal line reflecting a situation in which any price decrease drops the quantity supplied to zero; the elasticity value is infinity
perfectly elastic demand curve
A horizontal line reflecting a situation in which any price increase would reduce quantity demanded to zero; the elasticity has an absolute value of infinity
price elasticity of supply
A measure of the responsiveness of quantity supplied to a price change; the percentage change in quantity supplied divided by the percentage change in price
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
linear demand 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 reflecting a situation in which a price change has no effect on the quantity supplied; the elasticity value is zero
perfectly inelastic demand curve
A vertical line reflecting a situation in which 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 remains the same; the elasticity has an absolute value of 1.0
unit-elastic supply curve
Everywhere along the demand curve, the percentage change in price causes an equal but offsetting percentage change in quantity demanded, so total revenue remains the same; the elasticity has an absolute value of 1.0
price elasticity of demand
Measures how responsive quantity demanded is to a price change; the percentage change in quantity demanded divided by the percentage change in price
price elasticity formula
Percentage change in quantity demanded divided by the percentage change in price; the average quantity and the average price are used as bases for computing percentage changes in quantity and in price
total revenue
Price multiplied by the quantity demanded at that price
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 demand
The percentage change in quantity demanded equals the percentage change in price; the resulting price elasticity has an absolute value of 1.0
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; it's 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