Economics (Fach) / Economics Definitions (Lektion)
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Economics Definitions
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- Market Clearing A market clears when supply matches demand, leaving no shortage or surplus.
- Price Elasticity of Demand A measure of the responsiveness of quantity demanded to a change in price.
- Elastic Demand If demand is (price) elastic, then any change in price will cause the quantity demanded to change proportionately more. (Ignoring the negative sign) it will have a value greater than 1.
- Inelastic Demand If demand is (price) inelastic, then any change will cause the quantity demanded to change by a proportionately smaller amount. (Ignoring the negative sign) it will have a value less than 1.
- Unit Elasticity When the price elasticity of demand is unity, this is where quantity demanded changes by the same proportion as the price. Price elasticity is equal to -1.
- Total Consumer Expenditure (TE) (per period) The price of the product multiplied by the quantity purchased: TE = P x Q.
- Total Revenue (TR) (per period): The total amount received by firms from the sale of a product, before the deduction of taxes or any other costs. The price multiplied by the quantity sold: TR = P x Q.
- Income Elasticity of Demand The responsiveness of demand to a change in consumer incomes: the proportionate change in demand divided by the proportionate change in income.
- Cross-price Elasticity of Demand The responsiveness of demand for one good to a change in the price of another: the proportionate change in demand for one good divided by the proportionate change in price of the other.