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4.9: Key Terms

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    108383

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    Price elasticity of demand is measured as the percentage change in quantity demanded, divided by the percentage change in price.

    Demand is elastic if the price elasticity is greater than unity. It is inelastic if the value lies between unity and 0. It is unit elastic if the value is exactly one.

    Cross-price elasticity of demand is the percentage change in the quantity demanded of a product divided by the percentage change in the price of another.

    Income elasticity of demand is the percentage change in quantity demanded divided by a percentage change in income.

    Luxury good or service is one whose income elasticity equals or exceeds unity.

    Necessity is one whose income elasticity is greater than zero and is less than unity.

    Inferior goods have a negative income elasticity.

    Elasticity of supply is defined as the percentage change in quantity supplied divided by the percentage change in price.

    Tax Incidence describes how the burden of a tax is shared between buyer and seller.

    This page titled 4.9: Key Terms is shared under a CC BY-NC-SA 4.0 license and was authored, remixed, and/or curated by Douglas Curtis and Ian Irvine (Lyryx) via source content that was edited to the style and standards of the LibreTexts platform; a detailed edit history is available upon request.