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20 Cards in this Set

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