econ defs (chapter 5)
Terms
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- 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
- 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