# 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”

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