A measure of how much one economic variable responds to changes in another economic variable.
price elasticity of demand
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.
elastic demand
when the percentage change in quantity demanded is greater than the percentage change in price, so the price elasticity is greater that 1 in absolute value.
inelastic demand
when the percentage change in quantity demanded is less than the percentage change in price, so the price elasticity is less than 1 in absolute value.
unit-elastic demand
when the percentage change in quantity demanded is equal to the precentage change in price, so the price elasticity is equal to 1 in absolute value.
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.
The determinants of the pirce elasticity of demand are:
- Availability of close substitutes
- Passage of time
- luxuries versus neccessities
- definition of the market
- share of the good in the consumer's budget
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. (P)(Q)
If demand is elastic then an increase in price causes revenue to..
reduce
If demand is elastic and a then a decrease in price causes revenue to...
increase
If demand is inelastic then an increase in price causes revenue to..
increase
if demand is inelastic then a decrease in price causes revenue to..
reduce
If demand is unit elastic then any price change...