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Elasticity
Chapter 9
| Term | Definition |
|---|---|
| Cross elasticity of demand | The responsiveness of the demand for one good to a change in the price of another good. |
| Inferior good | A good with a negative income effect. Less of it will be bought as income rises. |
| Income elasticity of demand | The responsiveness of demand for a good to changes in income. |
| Luxury good | A normal good on which a greater proportion of income is spent as income rises (YET>1) |
| Normal good | A good with a positive income effect. More of it will be bought as income rises. |
| Perfectly elastic demand | A good is said to have a perfectly elastic demand if a small increase in price will cause demand to fall to zero. |
| Perfectly inelastic demand | A good is said to have a perfectly inelastic demand if a change in its price will cause no change in quantity demanded. |
| Price elasticity of demand | The responsiveness of quantity demanded of a good to a change in the price of that good. |
| Price elasticity of supply | The responsiveness of the supply of a good to changes in its own price. |
| Relatively elastic demand | A good is said to have a relatively elastic demand if the proportionate change in the quantity demanded is greater than the proportionate change in price. |
| Relatively inelastic demand | A good is said to have a relatively inelastic demand when the proportionate change in quantity demanded is less than the proportionate change in price. |
| Unit elasticity of demand | A good is said to have unit elasticity of demand if the proportionate change in quantity demanded is equal to the proportionate change in price. |
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