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Key Terms
# Key Terms

- constant unitary elasticity
- when a given percentage 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 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 percentage 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 by 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