Chapter 5: Elasticity: A measure of Responsiveness

when demand is inelastic, price and revenue move in the ____ direction so an increase in price _____ revenues.

same, increases

Income elasticity of demand

A measure of the responsiveness of demand to changes in consumer income

Cross-price of elasticity of demand

A measure of the responsiveness of demand to changes in the price of related goods

Price elasticity of demand

A measure of the responsiveness of the quantity demanded to changes in price; equal to the *absolute value* of the percentage change in quantity demanded divided by the percentage change in price.

Price elasticity of supply

A measure of the responsiveness of the quantity supplied to changes in price; equal to the percentage change in quantity supplied divided by the percentage change in price.

Total revenue

The money that a firm gets from selling its products.

Unit elastic demand

The price elasticity of demand equals 1, so the percentage change in quantity equals the percentage change in price.

Elastic Demand

The price elasticity of demand is greater than 1, so the percentage change in quantity exceeds the percentage change in price.

Inelastic demand

The price elasticity of demand is less than 1, so the percentage change in quantity is less than the percentage change in price.

Perfectly inelastic demand

The price elasticity of demand is zero

Perfectly Inelastic supply

The price elasticity of supply equals zero.

Perfectly elastic supply

The price elasticity of supply is equal to infinity

while slope is ____ on a demand curve, elasticity is ____.

constant, not

when demand is elastic, price and revenue move in _____ directions so a decrease in price ______ revenues.

opposite, increases

Perfectly elastic demand

the price elasticity of demand is infinite