Chapter 5: Elasticity of Demand and Supply of Health Care Flashcards
Measures the responsiveness of one variable to a certain change of another variable.
The concept of elasticity
It measures how quanity Q (Demand and Supply) responds to change in the determining factors F (such as own price, income or price of related goods).
The concept of elasticity
Reported as numbers or coefficients
Measure
Meaning reaction to change
Responsiveness
∑
Greek letter epsilon used as symbol for elasticity
∆
Greek letter delta which means change
%
Percentage
Formula of Elasticty
Elasticity = Percentage change in Variable Q over Percentage change in variable F
∑ = %∆Q ÷ %∆F
Percentage change in Variable Q over Percentage change in variable F
Percentage change in one variable in relation to the percentage change in another variable
Elasticity
Measures the responsiveness of product demand to changes in one of its determinants
Elasticity of Demand
It measures the responsiveness of product supply to change in its determinants particularly price
Elasticity of supply
Elasticity measurements are particularly useful because it focuses on the ___________ change rather than the ______ change
Magnitude; Absolute
This makes useful for comparing responses across products, countries, and individuals.
Elasticity
Measures the percentage change in quantity with respect to percentage change in price
Price Elasticity
