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elasticity
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how much a percentage change in quantity demanded or quantity supplied is affected by a percentage of change in price; a ratio of one percentage change to another percentage change
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price elasticity of demand
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the ratio of the percent change in the quantity demanded to the percentage chance change in the price as we move along the demand curve
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price elasticity of supply
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the percentage change in quantity supplied divided by the percentage change in price
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elastic
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the elasticity calculated from the appropriate formula that has an absolute value greater than 1
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infinite elasticity
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the extremely elastic situation where quantity changes by an infinite amount in response to even a tiny change in price; creates horizontal demand and supply curves
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inelastic
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the elasticity calculated from the appropriate formula has absolute value less than 1
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zero elasticity
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the highly inelastic case in which a percentage change in price, no matter how large, results in zero change in the quantity demanded or supplied; creates vertical demand and supply curves
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income elasticity of demand
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the percent change in the quantity of a good demanded when a consumer's income changes divided by the percent change in the consumer's income
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cross-price elasticity of demand
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the percentage change in the quantity of good A that is demanded as a result of a percentage change in price of good B
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midpoint method
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a technique for calculating the percent by calculating the changes in a variable compared with the average, or midpoint, of the starting and final values
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total revenue
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the total value of sales of a good or service; TR = Price x Quantity Sold
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price effect
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after a price increase, each unit sold sells at a higher price, which tends to raise revenue
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quantity effect
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after a price increase, fewer units are sold, which tends to lower revenue
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income-elastic
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when the income elasticity of demand of a good is greater than 1
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income-inelastic
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when the income elasticity of demand of a good is less than 1
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minimum wage
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a price floor that makes it illegal for an employer to pay employees less than a certain hourly rate
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nonbinding
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when a price floor is not determining the market outcome
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