4 : elasticity Flashcards
1
Q
what is elasticity ?
A
is the responsiveness of one variable to changes in another
2
Q
what are the four types of elasticities ?
A
*price elasticity of demand
- price elasticity of supply
- income elasticity
- cross elasticity
3
Q
what is the difference between elastic and inelastic ?
A
- the responsiveness of demand
- if % change in demand is greater than % change in price = elastic
- if % change in demand is less than the % change in price = inelastic
4
Q
what is the formula for elasticity ?
A
% change in quantity demanded
ped = —————————————————
% change in price
5
Q
what are the values for elasticity of demand ?
A
- ped = more than 1 then demand is elastic
- ped = between 0 - 1 then demand is inelastic
- ped = 0 then demand is perfectly inelastic: does not change when price changes
- ped = 1 then demand is unit elastic
