The responsiveness of the quantity demanded to a change in price, measured by dividing the percentage change in the quantity demanded of a product by the percentage change in the product's price.
%ΔQd / %ΔP
Elastic Demand
A demand is elastic when the percentage change in quantity demanded is greater than the percentage change in price.
%ΔQd > |1|
Inelastic Demand
A demand is inelastic when the percentage change in quantity demanded is less than the percentage change in price.
%ΔQd < |1|
Unit-elastic Demand
Demand is unit-elastic when the percentage change in quantity demanded is equal to the percentage change in price.
%ΔQd = |1|
Midpoint Formula
Price elasticity of demand is the difference between Q1 and Q2 divided by the average of Q1 and Q2 divided by the difference between P1 and P2 divided by the average of P1 and P2.
Perfectly Inelastic Demand
The case where the quantity demanded is completely unresponsive to price, and the price elasticity of demand equals zero.
Perfectly Elastic Demand
THe case where the quantity demanded is infinitely responsive to price, and the price elasticity of demand equals infinity.
How does time relate to product demand?
As more time passes, the higher the demand for the product becomes.
Narrowly Defined Market
consumers have more substitutes available
relationship between narrowly defined and elasticity
The more narrowly defined a market is, the more elastic the demand will be
relaitonship between the necessity demand curve and the luxury demand curve.
The demand curve for luxury items is more elastic than the demand curve for a necessity.
Total Revenue
The total amount of funds received by a seller of a good or service, calculated by multiplying price per unit by the number of units sold.
Cross-price Elasticity of Demand
The percentage change in quantity demanded of one good divided by the percentage change in the price of another good.
Income Elasticity of Demand
The responsiveness of quantity demanded to changes in income.
%ΔQd / %ΔIncome
Price Elasticity of Supply
The responsiveness of the quantity supplied to a change in price.
%ΔQs / %ΔP
Elastic effect on total revenue of an increase in price
Total revenue falls
Inelastic effect on total revenue of an increase in price
Total revenue rises
Unit-elastic effect on total revenue of an increase in price
Total revenue unchanged
Substitutes' value of cross-price elasticity
Positive
Complements' value of cross-price elasticity
Negative
Unrelated products value of cross-price elasticity