You are on page 1of 2

Elasticity refers to the degree of responsiveness in supply or demand in relation to changes in

price. If a curve is more elastic, then small changes in price will cause large changes in quantity
consumed. If a curve is lesselastic, then it will take large changes in price to effect a change in
quantity consumed.

Price elasticity of demand is a measure of the relationship between a change in the quantity
demanded of a particular good and a change in its price. Price elasticity of demand is a
term in economics often used when discussing price sensitivity. The formula for calculating
price elasticity of demand is:
Price elasticity of supply (PES or Es) is a measure used in economics to show the
responsiveness, or elasticity, of the quantity supplied of a good or service to a change in
its price.
income elasticity of demand measures the responsiveness of the quantity demanded for a
good or service to a change in the income of the people demanding the good, ceteris paribus.
the cross elasticity of demand or cross-price elasticity of demand measures the
responsiveness of the quantity demanded for a good to a change in the price of another good,
ceteris paribus.

Elastic - Describes a supply or demand curve which is relatively responsive to


changes in price. That is, a curve wherein the quantity supplied or demanded
changes easily when the price changes. A curve with an elasticity greater than or
equal to 1 is elastic.
Elasticity - Refers to the degree of responsiveness a curve has with respect to
price. If quantity changes easily when price changes, then the curve is elastic; if
quantity doesn't change easily with changes in price, the curve is inelastic. The
numerical equation to determine elasticity is:
Elasticity = (% Change in Quantity)/(% Change in Price)
If elasticity is greater than 1, the curve is elastic. If it is less than 1, it is inelastic.
If it equals one, it is unit elastic.
Unit elastic - Describes a supply or demand curve which is perfectly
responsive to changes in price. That is, the quantity supplied or demanded
changes according to the same percentage as the change in price. A curve with
an elasticity of 1 is unit elastic.
The basic formula is the absolute value of the percent change in quantity demanded divided the percent
change in Price.
Ed = |%Q d / % P|
If the ratio is below one the Ed is inelastic. At one then the Ed is unitary and is above one, elastic.
You can tell this by the formula. If a buyer is inelastic to the change in price then denominator will change

more than the numerator (Ed<1). If the demand is elastic, then the change in Quantity demanded will be
higher than the change in price (Ed>1)