Ag Econ Ch.5

point elasticity

a measure of elasticity at a given point on a demand curve

own-price elasticity of demand

a measure of the relative response of consumption of a good or service to changes in price. It is defined as the percentage change in the quantity demanded divided by the percentage change in price

Cross-price elasticity

a measure of the response of consumption of a good or service to changes in the price of another good or service. It is defined as the percentage change in the quantity of good A demanded divided by the percentage change in the price of good B.

perfectly elastic demand

a perfectly elastic demand curve is parallel to the horizontal or quantity axis

perfectly inelastic demand

a perfectly inelastic demand curve is perpendicular to the horizontal or quantity axis

substitutes

goods A and B are substitutes if the cross-price elasticity of demand is positive

inferior goods

goods for which consumption falls (rises) when income increases (decreases)

normal good

goods for which consumption rises (falls) when income increases (decreases)

Complements

goods typically consumed together such as hamburgers and hamburger buns; goods for which cross-price elasticities are negative.

independent goods

goods whose consumption is independent from the consumption of goods; examples include toothpaste and milk or any meat product and any detergent; goods for which cross-price elasticities are zero

inelastic demand

is the inelastic nature of the demand curve for raw agricultural products, when combined with a bumper crop and rising imports, drives down the price of these commodities. Revenue falls sharply because of steepness of the demand curve

luxuries

normal goods whose income elasticity exceeds one

necessity

normal goods whose income elasticity is less than one

income elasticity

percentage change in quantity supplied with respect to a percentage change in the price of the product.

unitary elastic

the demand curve is unitary elastic where the percentage change in quantity is identical to the percentage change in price

elastic

a demand or supply curve is said to be elastic if the percentage change in quantity is greater than a given percentage change in price. The flatter the curve, for example, the more elastic it is said to be.

inelastic

a demand or supply curve is said to be inelastic if the percentage change in quantity is less than a given percentage change in price. The steeper the curve, for example, the more inelastic it is said to be

Arc elasticity

a measure of elasticity between two distinct points on a demand curve.