Microeconomics Exam 2

A measure of how much one economic variable responds to changes in another economic variable.

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.

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.

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.

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.

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.

• - Availability of close substitutes
• - Passage of time
• - luxuries versus neccessities
• - definition of the market
• - share of the good in the consumer's budget

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)

reduce

increase

increase

reduce

does not affect revenue