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Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. More precisely, it gives the percentage change in quantity demanded in response to a one percent change in price (holding constant all the other determinants of demand, such as income). It was devised by Alfred Marshall
Ed = 0
- 1 < Ed < 0
Ed = - 1
Ed = -
relatively inelastic when the percentage change in quantity demanded is less than the percentage change in price (so that Ed ! " #)$
unit elastic, unit elasticity, unitary elasticity, or unitarily elastic demand when the percentage change in quantity demanded is equal to the percentage change in price (so that Ed % " #)$ and relatively elastic when the percentage change in quantity demanded is greater than the percentage change in price (so that Ed & " #).
Elasticities of demand
Price elasticity of demand
-rice elasticity of demand measures the percentage change in quantity demanded caused by a percent change in price. As such, it measures the e,tent of movement along the demand curve. .his elasticity is almost always negative and is usually e,pressed in terms of absolute value (i.e. as positive numbers) since the negative can be assumed. In these terms, then, if the elasticity is greater than # demand is said to be elastic$ between +ero and one demand is inelastic and if it equals one, demand is unit"elastic. Income elasticity of demand
Income elasticity of demand measures the percentage change in demand caused by a percent change in income. A change in income causes the demand curve to shift reflecting the change in demand. IE/ is a measurement of how far the curve shifts hori+ontally along the 0"a,is. Income
elasticity can be used to classify goods as normal or inferior. 'ith a normal good demand varies in the same direction as income. 'ith an inferior good demand and income move in opposite directions.123 Cross price elasticity of demand
4ross price elasticity of demand measures the percentage change in demand for a particular good caused by a percent change in the price of another good. 5oods can be complements, substitutes or unrelated. A change in the price of a related good causes the demand curve to shift reflecting a change in demand for the original good. 4ross price elasticity is a measurement of how far, and in which direction, the curve shifts hori+ontally along the ,"a,is. A positive cross" price elasticity means that the goods are substitute good
Elasticities of supply
Price elasticity of supply
.he price elasticity of supply measures how the amount of a good firms wish to supply changes in response to a change in price.163 In a manner analogous to the price elasticity of demand, it captures the e,tent of movement along the supply curve. If the price elasticity of supply is +ero the supply of a good supplied is 7inelastic7 and the quantity supplied is fi,ed. Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. More precisely, it gives the percentage change in quantity demanded in response to a one percent change in price (holding constant all the other determinants of demand, such as income). It was devised by Alfred Marshall 8uestion -rice #2( ##( #(( ;( <= 8uantity #(( 2(( 29( 66( 69( e 9.:9 6.#6 #.; #.(6 (.;#