Compact Glossary of Elasticities of Demand

PRICE

ELASTICITIES

A relationship is described as

Perfectly elastic or infinitely elastic

 

 

When the elasticity value is

Infinity

Which means that

The smallest possible increase (decrease) in price causes an infinitely large decrease (increase) in the quantity demanded.

Elastic Less than infinity but greater than 1 The percentage decrease (increase) in the quantity demanded exceeds the percentage increase (decrease) in price.
Unit elastic 1 The percentage decrease (increase) in the quantity demanded
Inelastic Greater than zero but less than 1 The percentage decrease (increase) in the quantity demanded is less than the percentage increase (decrease) in price.
Perfectly inelastic or completely inelastic Zero The quantity demanded is the same at all prices.
CROSS ELASTICITIES

A relationship is described as

Perfect substitutes

When he elasticity value is

Infinity

Which means that

The smallest possible increase (decrease) in the price of one good causes an infinitely large increase (decrease) in the quantity demanded of the other good.

Substitutes Positive, less than infinity If the price of one good increases (decreases) the quantity demanded of the other good also increases (decreases).
Independent Zero The quantity demanded of one good remains constant regardless of the price of the other good.
Complements Less than zero The quantity demanded of one good decreases (increases) when the price of the other good increases (decreases).
INCOME ELASTICITIES

A relationship is described as Income elastic (normal good)

When the elasticity value is Greater than 1 Which means that

The percentage increase (decrease) in the quantity demanded is greater than the percentage (decrease) in income.

Income inelastic (normal good) Less than 1 but greater than zero The percentage increase (decrease) in the quantity demanded is less than the percentage increase (decrease) in income.
Negative income elastic (inferior good) Less than zero When income increases (decreases) quantity demanded decreases (increases).

2 thoughts on “Compact Glossary of Elasticities of Demand”

  1. Thank you for each of your efforts on this website. My mom enjoys setting aside time for internet research and it is obvious why. All of us notice all of the lively form you offer worthwhile ideas through the web blog and therefore foster contribution from other people on that concept and our princess is learning a lot. Take pleasure in the remaining portion of the new year. You’re carrying out a very good job.

  2. I and also my guys appeared to be following the good guidelines located on the blog and then the sudden came up with an awful suspicion I never thanked the blog owner for those secrets. My young boys became joyful to see all of them and already have definitely been enjoying these things. Appreciation for being simply thoughtful and also for obtaining varieties of brilliant information most people are really wanting to be informed on. My very own sincere apologies for not expressing appreciation to earlier.

Leave a Reply

Your email address will not be published. Required fields are marked *