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Glossary

  1. Normal good: If we make more money, we will purchase more of these kinds of goods.
  2. Inferior good: When our income decreases, we purchase more of these goods because it is more cost effective.
  3. Elasticity: A measure of responsiveness that tells us how a dependent variable such as quantity responds to a change in an independent variable such as price.
  4. Demanded elasticity: The extent to which a change in price causes a change in the quantity demanded.
  5. Elastic: When a given change in price causes a relatively larger change in quantity demanded.
  6. Inelastic: A given change in price causes a relatively smaller change in the quantity demanded.
  7. Unit elastic: A given change in price causes a proportional change in quantity demanded.