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Micro - Ch. 5
Microeconomics - Ch 5 - Elasticity
Term | Definition |
---|---|
constant unity elasticity | when a given percent price change in price leads to an equal percentage change in quantity demanded or supplied |
cross-price elasticity of demand | the percentage change in the quantity of good A that is demanded as a result of a percentage change in good B |
elastic demand | when the elasticity of demand is greater than one, indication a high responsiveness of quantity demanded or supplied to changes in price |
elastic supply | when the elasticity of supply is greater than one, indication a high responsiveness of quantity demanded or supplied to changes in price |
elasticity | an economics concept that measure responsiveness of one variable to changes in another variable |
elasticity of savings | the percentage change in the quantity of saving divided by the percentage change in interest rates |
inelastic demand | when the elasticity of demand is less than one, indication that a 1 percent increase in price paid by the consumer leads to less than a 1 percent change in purchases (and vice versa); this indicates a low responsiveness by consumers to price changes |
inelastic supply | when the elasticity of supply is < 1, indication that a 1% increase in price paid to the firm will result in a < 1% increase in production by the firm; this indicates a low responsiveness of the firm to price increases (an vice versa if price drops) |
infinite or perfect elasticity | the extremely elastic situation of demand or supply where quantity changes by an infinite amount in response to any change in price; HORIZONTAL in appearance |
zero or perfect inelasticity | the highly inelastic case of demand or supply in which a percentage change in price, no matter how large, results in zero change in the quantity; VERTICAL in appearance |
price elasticity | the relationship between the percent change in price resulting in a corresponding percentage change in the quantity demanded or supplied |
price elasticity of demand | percentage change in the quantity demanded of a good or service divided the percentage change in price |
price elasticity of supply | percentage change in the quantity supplied divided by the percentage change in price |
tax incidence | manner in which the tax burden is divided between buyers and sellers |
unitary elasticity | when the calculated elasticity is equal to one indicating that a change in the price of the good or service results in a proportional change in the quantity demanded or supplied |
wage elasticity of labor supply | the percentage change in hours worked divided by the percentage change in wages |
inelastic; elastic | in the goods and services market, quantity supplied and demanded are often slower to react to price changes in the short run than in the long run. As a result, demand and supply tend to be relatively _________ in the short run and _______ in the long run |