Flashcards for:
Understanding Elasticity of Demand in Economics

The elasticity coefficient for perfectly inelastic demand is zero (0).

The Total Revenue Test helps determine how changes in price affect total revenue depending on the demand's elasticity.

The elasticity coefficient for inelastic demand is less than 1 (<1).

Unit elastic demand means the percentage change in quantity demanded is equal to the percentage change in price.

Perfectly elastic demand means quantity demanded is infinitely sensitive to price changes.

The elasticity coefficient for perfectly elastic demand is infinite.

In inelastic demand, price increases lead to higher total revenue because the quantity decreases only slightly.

Inelastic demand means quantity demanded changes slightly despite significant price changes. An example is gasoline.

Elasticity of demand measures how quantity demanded of a good responds to a change in its price.

Elasticity of Demand Coefficient = Percentage change in quantity demanded / Percentage change in price.

Perfectly inelastic demand means quantity demanded does not change regardless of price changes.

Absolute values are used due to the inverse relationship between price and quantity.

Elastic demand is highly responsive to changes in price, common in goods with many substitutes or luxury items.

The elasticity coefficient for unit elastic demand is equal to 1 (=1).

There is an inverse relationship where if price increases, quantity demanded decreases, and vice versa.