Chapter 20 Elasticity of Demand and Supply

price elasticity of demand

the ratio of the percentage change in quantity demanded of a product or resource to the percentage change in its price; a measure of the responsiveness of buyers to a change in the price of a product or resource

elastic demand

product or resource demand whose price elasticity is greater than 1. This means the resulting change in quantity demanded is greater than the percentage change in price

inelastic demand

product or resource demand supply for which the price elasticity coefficient is less than 1. This means the resulting percentage change in quantity demanded is less than the percentage change in price

unit elasticity

demand or supply for which the elasticity coefficient is equal to 1; means that the percentage change in the quantity demanded or supplied is equal to the percentage change in price

perfectly inelastic demand

product or resource demand in which price can be of any amount at a particular quantity of the product or resource demanded; quantity demanded does not respond to a change in price; graphs as a vertical demand curve

perfectly elastic demand

product or resource demand in which quantity demanded can be of any amount at a particular product price; graphs as a horizontal demand curve

total revenue (TR)

the total number of dollars received by a firm (or firms) from the sale of a product; equal to the total expenditures for the product produced by the firm (or firms); equal to the quantity sold (demanded) multiplied by the price at which it is sold

price elasticity of supply

the ratio of the percentage change in quantity supplied of a product or resource to the percentage change in its price; a measure of the responsiveness of producers to a change in the price of a product or resource

market period

all the product and resource markets of a market economy and the relationships among them; a method that allows the price determined in those markets to allocate the economy's scarce resources and to communicate and coordinate the decisions made by consum

cross elasticity of demand

the ratio of the percentage change in quantity demanded of one good to the percentage change in the price of some other good. A positive coefficient indicates the two products are substitute goods; a negative coefficient indicates they are complimentary g

income elasticity of demand

the ratio of the percentage change in the quantity demanded of a good to a percentage change in consumer income; measures the responsiveness of consumer purchases to income changes

elastic supply

product or resource supply whose price elasticity is greater than 1. This means the resulting change in quantity supplied is greater than the percentage change in price.

inelastic supply

product or resource supply for which the price elasticity coefficient is less than 1. The percentage change in quantity supplied is less than the percentage change in price.

perfectly inelastic supply

product or resource supply in which price can be of any amount at a particular quantity of the product or resource demanded; quantity supplied does not respond to a change in price; graphs as a vertical supply curve

perfectly elastic supply

product or resource supply in which quantity supplied can be of any amount at a particular product or resource price; graphs as a horizontal supply curve