01:220:102 Chapter Notes - Chapter 4: Test Method, Longrun, Qi

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Price elasticity of demand- units-free measure of the responsiveness of the quantity demanded of a good to change in its price when all other influences on buying plans remain the same. Elasticity is the ratio of two percentage changes. Units-free because the percentage change in each variable is independent of the units in which the variable is measured. Positive price causes a negative demand, so price elasticity of demand is a negative number. Absolute value of the price elasticity of demand tells us how responsive the quantity demanded is. Perfectly inelastic demand- if quantity demanded remains constant when the price changes, then the price elasticity of demand is zero. Important product that will be bought no matter the price (i. e. insulin) Unit elastic demand- if the percentage change in the quantity demanded equals the percentage change in the price, then the price elasticity equals 1. Inelastic demand- occurs when the price elasticity of demand is between zero and 1.

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unitary elastic demand

1. __________________ A measure of consumersâ sensitivity or responsiveness to changes in the price of a good or service.

2. ___________________ When the percentage change in price (in absolute value) is more than the percentage change in quantity demanded (in absolute value).

3. ___________________ When the percentage change in quantity demanded (in absolute value) is more than the percentage change in price (in absolute value).

4. ___________________ When the percentage change in quantity demanded (in absolute value) is just equal to the percentage change in price (in absolute value).

5. ___________________ Total amount paid to a producer for a good or service P * Q.

6. ___________________ The effect on total revenue of a change in price, holding quantity constant.

7. ___________________ The effect on total revenue of a change in quantity, holding price constant.

8. ___________________ An elasticity calculated over an interval of a demand curve or demand schedule.

9. ___________________ Elasticity at a specific price or point on a demand curve.

10. ___________________ A measure of how responsive quantity demanded is to a change in income, all other things constant.

11. ___________________ A measure showing how responsive the quantity demanded of one good is to changes in the price of another good, other factors constant.

12. ___________________ The additional revenue received by producing and selling one more unit of output.

13. ___________________ Units of output that could have been sold at a higher price had the firm not lowered its price to sell additional (marginal) units.

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01:220:102 Chapter Notes - Chapter 4: Test Method, Longrun, Qi

01:220:102 Full Course Notes

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