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Christina G.

Price elasticity of demand

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.

Price elasticity of demand = (Percentage change in quantity demanded)/(Percentage change in price)

Elastic demand

Demand is elastic when the percentage change in quantity demanded is greater than the percentage change in price, so the price elasticity is greater than 1 in absolute value.

PE>1

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Inelastic demand

Demand is inelastic 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.

PE<1

Unit-elastic demand

Demand is unit elastic when the percentage change in quantity demanded is equal to the percentage change in prices so the price elasticity is equal to 1 in absolute value.

PE=1

Income elasticity of demand

A measure of the responsiveness of quantity demanded to changes in income, measured by the percentage change in quantity demanded divided by the percentage change in income.

Cross-price elasticity of demand

the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good.

Elasticity

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

Perfectly elastic demand

The case where the quantity demanded is infinitely responsive to price, and the price elasticity of demand equals infinity.

Perfectly inelastic demand

- the case where the quantity demanded is completely unresponsive to price, and the price elasticity of demand equals zero.

Total revenue

The total amount of of funds received by a seller of a good or service, calculated by multiplying price per unit by the number of units sold.

Price elasticity of supply

- the responsiveness of the quantity supplied to a change in price, measured by dividing the percentage change in the quantity supplied of a product by the percentage change in the products price.

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