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Elasticity
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Quantifies how sensitive one variable is to change in a second.
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Price Elasticity of Demand
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The ratio of the percentage change in quantity demanded to the percentage change in price; measures the responsiveness of quantity demanded to changes in price.
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Perfectly Inelastic Demand
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Demand in which quantity demanded does not respond at all to a change in price.
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Perfectly Elastic Demand
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Demand in which quantity drops to zero at the slightest increase in price.
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Inelastic Demand
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Demand that responds somewhat, but not a great deal, to changes in price. Inelastic demand always has a numerical value between zero and one.
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Elastic Demand
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When elasticity is greater than an absolute value of one.
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Unitary Elasticity
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A demand relationship in which the percentage change in quantity of a product demanded is the same as the percentage change in price in absolute value (a demand elasticity of one).
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Midpoint Formula
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A more precise way of calculating percentages using the values halfway between P1 and P2 for the base in calculating the percentage change in price and the value halfway between Q1 and Q2 as the base for calculating the percentage change in quantity demanded.
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Point Elasticity
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A measure of elasticity that uses the slope measurement.
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Cross-Price Elasticity of Demand
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A measure of the response of the quantity of one good demanded to a change in the price of another good.
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Elasticity of Supply
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A measure of the response of quantity of a good supplied to a change in price of that good. Likely to be positive in output markets.
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Elasticity of Labor Supply
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A measure of the response of labor supplied to a change in the price of labor.
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Excise Taxes
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A per-unit tax on a specific good.
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Income Elasticity of Demand
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A measure of the responsiveness of demand to changes in income.
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