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20 Cards in this Set
- Front
- Back
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arc elasticity
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Average elasticity over a given range of a function
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complements
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Products that are inversely related in terms of price and quantity
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countercyclical
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Inferior goods whose demand falls with rising income, and rises with falling income
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cross-price elasticity
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Responsiveness of demand for one product to changes in the price of another
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cyclical normal goods
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Products for which demand is strongly affected by changing income
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elastic demand
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Situation in which a price change leads to a more than proportionate change in quantity demanded
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elasticity
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Percentage change in a dependent variable resulting from a 1 percent change in an independent variable
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endogenous variables
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Factors controlled by the firm
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exogenous variables
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Factors outside the control of the firm
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income elasticity
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Responsiveness of demand to changes in income, holding constant the effect of all other variables
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inelastic demand
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Situation in which a price change leads to a less than proportionate change in quantity demanded
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inferior goods
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Products with sales that rise when income falls
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market demand curve
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Total amount of a specific good or service customers are willing to buy at various prices under present market conditions
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noncyclical normal goods
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Products for which demand is relatively unaffected by changing income
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normal goods
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Products with sales that rise when income increases
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optimal price formula
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For any downward-sloping demand curve, maximum profits result when P = MC/ [1 + (1/´P)]
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point elasticity
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Elasticity at a given point on a function
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price elasticity of demand
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Responsiveness of the quantity demanded to changes in the price of the product, holding constant the values of all other variables in the demand function
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substitutes
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A direct relation between the price of one product and the demand for another product
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unitary elasticity
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Situation in which price and quantity changes exactly offset each other
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