Term
| Price elasticity of demand |
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Definition
| the ratio of percent change in the quanitity demanded to the percent change in the price as we move along the demand curve (dropping minus sign) |
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Term
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Definition
| a technique for calculating the percent change in which changes in a variable are compared with the average or midpoint of the starting and final values |
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Term
| Perfectly inelastic demand |
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Definition
| the case in which the quanitity demanded does not respond at all to changes in the price; the demand curve is a vertical line |
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Term
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Definition
| the case in which any price increase will cause the quanitity demanded to drop to zero; the demand curve is a horizontal line |
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Term
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Definition
| the case in which the price elasticity of demand is excactly 1 |
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Term
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Definition
| when the price elasticity of demand is greater than 1 |
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Term
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Definition
| when the price elasticity of demand is less than 1 |
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Term
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Definition
| the total value of sales of a good or service (the price of the good or service multiplied by the quanitity sold) |
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Term
| cross-price elasticity of demand |
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Definition
| a measure of the effect of the change in the price of one good on the quanitity demanded of the other; it is equal to the percent change in the quantity demanded of one good divided by the percent change in the price of another good |
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Term
| income elasticity of demand |
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Definition
| the precent change in the quantity of a good demanded when a consumer's income changes divided by the percent change in the consumer's income |
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Term
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Definition
| when the income elasticity of demand for a good is greater than 1 |
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Term
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Definition
| when the income elasticity of demand for a good is positive but less than 1 |
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Term
| price elasticity of supply |
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Definition
| a measure of the responsiveness of the quanitity of a good supllied to the price of that good; the ratio of the percent change in the quanitity supplied to the percent change in the price as we move along the suply curve |
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Term
| perfectly inelastic supply |
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Definition
| the case in which the price elasticity of supply is zero, so that changes in the price of the good have no effect on the quanitity supplied; the perfectly inelastic supply curve is a vertical line |
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Term
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Definition
| the case in which even a tiny increase or reduction in the price will lead to a very large changes in the quantity supplied, so that the price elasticity of supply is infinite; the perfectly elastic supply curve is a horizontal line |
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