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ELASTICITY IN SUPPLY.
….INTRODUCTION….
Elasticity = Responsiveness or Sensitivity.
Means Relative Response of 1 variable to changes in
another variable.
Have 2 situation;
If demand ELASTIC, Price change will cause Total Revenue to
change in the opposite direction since the increase in price
has a large impact on quantity demanded.
Demand Elastic:
P x Qd = TR
P x Qd = TR
… price elasticity of demand and total
revenue…
If Demand INELASTIC, price change will cause Total Revenue to
change in same direction since the increase in price does not
have a large impact on quantity demanded.
Demand InElastic:
P x Qd = TR
P x Qd = TR