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