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Elasticity
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a numerical measure of the responsiveness of quantity demanded or supplied to one of its determinants
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price elasticy of demand = ?
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% change in Q(d)
% change in P
% change in P
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midpoint method = ?
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the number 1/2 way between the start and end values
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what is a value greater than 1.0
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elastic
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what is a value less than 1.0
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inelastic
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what is a value equal to 1.0
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unit elastic
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perfectly inelastic demand
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applies to something that will always be demanded no matter the price
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unit elastic
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...
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what happens to revenue when prices increase
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higher price means more revenue on each good sold but you sell fewer goods due to law of demand
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Increase in price means...
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decrease in revenue
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decrease in price means...
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increases revenue
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price elasticity of supply
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a measure of how much the quantity supplied of a good responds to a change in the price of that good
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price elasticity of supply =
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% change in Q(s)
% change in P
% change in P
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income elasticity of demand
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measures the response of quantity demanded to change in consumer income
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Income elasticity of demand =
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% change in Q (d)
% change in income
% change in income
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cross-price elasticity of demand
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measures the response of demand for one good to changes in the price of another good
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cross-price elasticity of demand =
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% change in Q(d) for good 1
%change in price of good 2
%change in price of good 2
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