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In many microeconomic applications (e.g. monopoly price-setting) the inverse elasticity appears. Explaining such relations to laymen is often awkward because inverse proportionality is not as intuititve as direct proportionality.

In physics, there are often separate terms for inverses of important concepts (e.g. electrical resistance and conductance are each other's inverse).

Question: is there a commonly used term for the inverse elasticity? If not, what would be a suitable term that is easily grasped by laymen?

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Lerner Index. The term is pretty ambiguous in use. Sometimes people mean, by Lerner Index, "price-cost margin," and sometimes people mean "minus the inverse of the demand elasticity." But that works to your favor here. It can mean what you want it to, so use it that way.

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  • $\begingroup$ Thanks, but in Lerner's original paper, he defines it to be the LHS of price-cost margin equals minus inverse elasticity. I was actually looking for a word like rigidity, or resilience that has intuitive appeal to laymen. $\endgroup$ – TemplateRex Jan 30 '15 at 17:13
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Economists generally call it the "inverse elasticity". But note $$\frac{1}{\eta}=\left(\frac{\partial Q}{\partial P}\frac{P}{Q}\right)^{-1}=\frac{1}{\left(\frac{\text{% change in quantity}}{\text{% change in price}}\right)}=\frac{\text{% change in price}}{\text{% change in quantity}}$$

Thus, whilst the price elasticity of demand can be interpreted as (roughly)

The percentage change in quantity sold that would follow a one percentage point increase in the price.

the inverse elasticity (the "demand elasticity of price") could be explained as

The percentage change in price necessary to achieve a one percentage point increase in quantity.

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  • $\begingroup$ I know the interpretation, thanks, but it doesn't answer my question. To clarify: I am specifically looking for a single word, e.g. something like rigidity, resilience etc. I gather that such a word is not used in the economic literature, but perhaps people use it colloquially. $\endgroup$ – TemplateRex Jan 28 '15 at 19:02
  • $\begingroup$ @TemplateRex just be explicit about stating "the ___ elasticity of ____". That way the terminology is never ambiguous and there's no reason to mess around with inverses in the first place. $\endgroup$ – shadowtalker Jan 28 '15 at 19:21

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