| 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). |
Compact Glossary of Elasticities of Demand
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