Chapter 5

the percentage change in one variable in relation to the percentage change in another variale

measures the percentage change in quantity with respect to the percentage change in price

Categories of price elasticity

measures the response of quantity demanded with respect to its price

measures the responsiveness of quantity supplied in response to the percentage change in the price of goods and services

Two ways of calculating the price elasticity of demand

measures the elasticity at a particular point

Measures the elasticity between two points

Categories of price elasticity of demand

the value of price elasticity coefficient is greater than one

the value of price elasticity coefficient is less than one

elasticity coefficient is equal to one

coefficient equals infinity

elasticity coefficient equals zero

Determinants of price elasticity of demand

Categories of price elasticity of supply

change in price leads to a greater change in quantity supplied

a change in price leads to a lesser change in quantity supplied

change in price leads to an equal change in quantity supplied

occurs when there is no change in price and there is an infinite change in quantity supplied

occurs when a change in price has no effect on quantity supplied

primary determinant of price elasticity of supply

Classification of time period

the responsiveness of quantity demanded in response to a change in income

income elasticity is positive

income elasticity is negative

normal goods with income elasticity is greater than one

measures the responsiveness of quantity demanded of a certain goods or service to a change in price of another good or service

measures whether the good is a substitute or a complementary

goods that are used in conjunction with other goods

goods that can be used in place of another