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5.6: Key Terms

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    constant unitary elasticity
    when a given percent price change in price leads to an equal percentage change in quantity demanded or supplied
    cross-price elasticity of demand
    the percentage change in the quantity of good A that is demanded as a result of a percentage change in the price of good B
    elastic demand
    when the elasticity of demand is greater than one, indicating a high responsiveness of quantity demanded or supplied to changes in price
    elastic supply
    when the elasticity of either supply is greater than one, indicating a high responsiveness of quantity demanded or supplied to changes in price
    elasticity
    an economics concept that measures responsiveness of one variable to changes in another variable
    elasticity of savings
    the percentage change in the quantity of savings divided by the percentage change in interest rates
    inelastic demand
    when the elasticity of demand is less than one, indicating that a 1 percent increase in price paid by the consumer leads to less than a 1 percent change in purchases (and vice versa); this indicates a low responsiveness by consumers to price changes
    inelastic supply
    when the elasticity of supply is less than one, indicating that a 1 percent increase in price paid to the firm will result in a less than 1 percent increase in production by the firm; this indicates a low responsiveness of the firm to price increases (and vice versa if prices drop)
    infinite elasticity
    the extremely elastic situation of demand or supply where quantity changes by an infinite amount in response to any change in price; horizontal in appearance
    perfect elasticity
    see infinite elasticity
    perfect inelasticity
    see zero elasticity
    price elasticity
    the relationship between the percent change in price resulting in a corresponding percentage change in the quantity demanded or supplied
    price elasticity of demand
    percentage change in the quantity demanded of a good or service divided the percentage change in price
    price elasticity of supply
    percentage change in the quantity supplied divided by the percentage change in price
    tax incidence
    manner in which the tax burden is divided between buyers and sellers
    unitary elasticity
    when the calculated elasticity is equal to one indicating that a change in the price of the good or service results in a proportional change in the quantity demanded or supplied
    wage elasticity of labor supply
    the percentage change in hours worked divided by the percentage change in wages
    zero inelasticity
    the highly inelastic case of demand or supply in which a percentage change in price, no matter how large, results in zero change in the quantity; vertical in appearance

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