crossprice elasticity of demand
A measure of how much the quantity demanded of one good responds to a change in the price of another good,
computed as the percentage change in quantity demanded of the first good divided by the percentage change in
the price of the second good.
elasticity
A measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants.
income elasticity of demand
A measure of how much the quantity demanded of a good responds to a change in consumers' income,
computed as the percentage change in quantity demanded divided by the percentage change in income.
price elasticity of demand
A measure of how much the quantity demanded of a good responds to a change in the price of that good,
computed as the percentage change in quantity demanded divided by the percentage change in price.
price elasticity of supply
A measure of how much the quantity supplied of a good responds to a change in the price of that good,
computed as the percentage change in quantity supplied divided by the percentage change in price.
total revenue (in a market)
The amount paid by buyers and received by sellers of a good, computed as the price of the good times the
quantity sold.
Chapter Recap: Summary
o
The price elasticity of demand measures how much the quantity demanded responds to changes in the
price. Demand tends to be more elastic if close substitutes are available, if the good is a luxury rather than a
necessity, if the market is narrowly defined, or if buyers have substantial time to react to a price change.
o
The price elasticity of demand is calculated as the percentage change in quantity demanded divided by
the percentage change in price. If quantity demanded moves proportionately less than the price, then the
elasticity is less than 1, and demand is said to be inelastic. If quantity demanded moves proportionately
more than the price, then the elasticity is greater than 1, and demand is said to be elastic.
o
Total revenue, the total amount paid for a good, equals the price of the good times the quantity sold. For
inelastic demand curves, total revenue rises as price rises. For elastic demand curves, total revenue falls as
price rises.
o
The income elasticity of demand measures how much the quantity demanded responds to changes in
consumers' income. The crossprice elasticity of demand measures how much the quantity demanded of one
good responds to changes in the price of another good.
o
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 Spring '08
 BARCIA
 Price Elasticity, Supply And Demand

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