Microeconomics Chapter 6

• 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

• A demand is elastic when the percentage change in quantity demanded is greater than the percentage change in price.
• %ΔQd > |1|

• A demand is inelastic when the percentage change in quantity demanded is less than the percentage change in price.
• %ΔQd < |1|

• Demand is unit-elastic when the percentage change in quantity demanded is equal to the percentage change in price.
• %ΔQd = |1|

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.

The case where the quantity demanded is completely unresponsive to price, and the price elasticity of demand equals zero.

THe case where the quantity demanded is infinitely responsive to price, and the price elasticity of demand equals infinity.

As more time passes, the higher the demand for the product becomes.

consumers have more substitutes available

The more narrowly defined a market is, the more elastic the demand will be

The demand curve for luxury items is more elastic than the demand curve for a necessity.

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.

The percentage change in quantity demanded of one good divided by the percentage change in the price of another good.

• The responsiveness of quantity demanded to changes in income.
• %ΔQd / %ΔIncome

• The responsiveness of the quantity supplied to a change in price.
• %ΔQs / %ΔP

Total revenue falls

Total revenue rises

Total revenue unchanged

Positive

Negative

Zero