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Price Elasticity of Demand
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a measure of how responsive buyers are to price changes. it measures the percent change in quantity demanded that follows from a 1% price change. Price elasticity=% change in Qd/% change in P
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Elastic
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when the absolute value of a percent change in quantity is larger than the absolute value of the percent change in price, which means that the absolute value of the price elasticity is greater than 1
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Inelastic
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when the absolute value of a percent change in quantity is smaller than the absolute value of the percent change in price, which means that the absolute value of price elasticity is less than 1
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Perfectly Elastic
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when any change in price leads to an infinitely large change in quantity
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Perfectly Inelastic Demand
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when the quantity does not respond at all to a price change
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Total Revenue
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the total amount that you receive from buyers, which is calculated as price x quantity
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Cross Price Elasticity of Demand
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a measure of how responsive the demand of one good is to price changes of another. It measures the percent change in quantity demanded that follows from a 1% change in the price of another good. Cross price elasticity of demand=% change in Qd/% change in price of another good
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Income Elasticity of Demand
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a measure of how responsive the demand for a good is to changes in income. It measures the percent change in quantity demanded that follows from a 1% change in income. Income elasticity of demand=% change in Qd/% change in income
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Price Elasticity of Supply
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a measure of how responsive sellers are to price changes. It measures the percent change in quantity supplied that follows from a 1% price change. Price elasticity of supply=% change in quantity supplied/% change in price
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