Elasticity - the responsiveness if demand/supply to a change in its determinants Price Elasticity - the percentage change in quantity compared to a percentage

change in price Coefficient Elasticity - absolute value of elasticity Total Revenue - price multiplied by quantity Inferior Goods - goods which are bought when income levels are low, the demand for which tends to decrease when income increases Normal Goods - goods for which demand tends to increase when income increases Substitute Goods - goods used in place of each other Complementary Good - goods that supplement each other and are, therefore used together PRICE ELASTICITY OF DEMAND

Is measured by dividing the percentage change in quantity demanded by the percentage in price It has 2 measures Arc Elasticity - the coefficient of price elasticity of demand between two points along the demand curve Point Elasticity - the coefficient of price elasticity of demand at one point along the demand curve

INCOME ELASTICITY DEMAND percentage change in quantity demanded compared to the percentage change income The absolute value of the coefficient of income elasticity is also a measure of how responsive demand is to change in income. As income increases the coefficient of: > 1 means demand is ELASTIC and the good is SUPERIOR < 1 means demand is INELASTIC and the good is INFERIOR = 1 means demand is UNITARY and the good is NORMAL CROSS ELASTICITY OF DEMAND The percentage change in quantity demanded of one good compared to the percentage change in the price of a related good As a result if tue difference degrees of elasticity, there are different ways of presenting the demand curve D is relatively elastic, a change in price leads to significant change in quantity demanded

D is relatively inelastic, a change in price leads to a very slight change in quantity demanded

D is perfectly elastic. At a given price quantity demanded can change infinitely