chapter 6 - Chapter 6 Elasticity- the percentage change in...

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Chapter 6 Elasticity - the percentage change in one variable, divided by the percentage change in another variable As we move downward and to the right along a straight-line demand curve, the price elasticity of demand becomes smaller. As we move upward to the left, the elasticity increases. Elastic - when the own-price elasticity is greater than 1 Unit-elastic - when the elasticity is equal to 1 Inelastic - the elasticity is less than 1 The total revenue that a business firm gets from selling a product is the amount of money the firm receives from its sales. TR= (P)(Q) Perfectly elastic - the demand curve is completely horizontal Perfectly inelastic -quantity demanded does not change at all when price changes. The demand curve is a vertical line. Forces that cause goods to be elastic or inelastic : The availability of substitutes The importance of the good in the consumer’s budget The amount of time during which consumers can adjust to the price change Other things equal, consumers will have more elastic demand for items that make up a larger
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