The price elasticity of demand (PED) is the percentage change in the quantity demanded divided by the corresponding percentage change in its price. PED = (% change in quantity)/(% change in price) as we move along the demand curve.

Demand is elastic if the price elasticity is more negative than –1. Demand is inelastic if the price elasticity lies between –1 and 0. If the demand elasticity is –1, demand is unit-elastic.

Demand is perfectly elastic when the quantity demanded does not respond to changes in the price. It is perfectly elastic if any price increase will cause quantity demanded to drop to zero.

The total revenue is the total value of sales of a good or service and it is equal to quantity sold multiplied by unitary price.

The fallacy of composition means that what is true for the individual may not be true for everyone together, and what is true for everyone together may not hold for the individual.

The short run is the period after prices change but before quantity adjustment can occur. The long run is the period needed for complete adjustment to a price change. Its length depends on the type of adjustments consumers wish to make.

The cross-price elasticity of demand for good i with respect to changes in the price of good j is the percentage change in the quantity of good i demanded, divided by the corresponding percentage change in the price of good j.

The budget share of a good is its price times the quantity demanded, divided by total consumer spending or income.

The income elasticity of demand for a good is the percentage change in quantity demanded divided by the corresponding percentage change in income.

A normal good has a positive income elasticity of demand. An inferior good has a negative income elasticity of demand.

A luxury good has income elasticity above unity. A necessity has income elasticity below unity.

The incidence of a tax describes who eventually bears the burden of it.