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refers to a ratio or a measurement of the responsiveness of the buyers and sellers to price
changed.
refers to a ratio or a measurement of the responsiveness of the buyers and sellers to price changed.
Elasticity Demand
ED>1 Quantity demanded changes proportionately more than price change Elastic Demand
percentage change in quantity demanded is greater than percentage
change in price.
ED<1 Quantity demanded changes proportionately to price change or Inelastic Demand
percentage change is less than the percentage change in price.
ED=1 Quantity demanded changes proportionately to price change, or Unitary Demand
percentage change in quantity demanded is equal to percentage
change in price change.
ED= Quantity demanded changes in an infinite manner that causes small Perfectly inelastic
changes in price demand
ED=0 Quantity demanded does not changes as price changes Perfectly inelastic
demand
Total revenue is equivalent to the price of a good multiplied by the quantity of good sold.
Conditions
TR= price x quantity, Total expenditure=Price x quantity purchased, TR=TE
if the demand is inelastic, price and TR are inversely related. As price increase ( decrease), TR decrease
(increase).
if the demand is inelastic, price and TR are directly related. As price increases
(decreases), TR increases (decreases).
If unitary elastic, TR is independent of price. As price increases (decreases), TR
remains constant.
The determinants of supply elasticity are the time and effort exerted during the
production of goods and services.