5.5 An Elasticity Menagerie

We’ve just run through quite a few different elasticities. Keeping them all straight can be a challenge. So in Table 5-3 we provide a summary of all the elasticities we have discussed and their implications.

Table : TABLE 5-3 An Elasticity Menagerie
Price elasticity of demand = image (dropping the minus sign)
0 Perfectly inelastic: price has no effect on quantity demanded (vertical demand curve).
Between 0 and 1 Inelastic: a rise in price increases total revenue.
Exactly 1 Unit-elastic: changes in price have no effect on total revenue.
Greater than 1, less than ∞ Elastic: a rise in price reduces total revenue.
∞ Perfectly elastic: any rise in price causes quantity demanded to fall to 0. Any fall in price leads to an infinite quantity demanded (horizontal demand curve).
Cross-price elasticity of demand = image
Negative Complements: quantity demanded of one good falls when the price of another rises.
Positive Substitutes: quantity demanded of one good rises when the price of another rises.
Income elasticity of demand = image
Negative Inferior good: quantity demanded falls when income rises.
Positive, less than 1 Normal good, income-inelastic: quantity demanded rises when income rises, but not as rapidly as income.
Greater than 1 Normal good, income-elastic: quantity demanded rises when income rises, and more rapidly than income.
Price elasticity of supply = image
0 Perfectly inelastic: price has no effect on quantity supplied (vertical supply curve).
Greater than 0, less than ∞ ordinary upward-sloping supply curve.
∞ Perfectly elastic: any fall in price causes quantity supplied to fall to 0. Any rise in price elicits an infinite quantity supplied (horizontal supply curve).