Elasticities Flashcards
What is elasticity?
The effect that a change in one variable causes over another
What is Elasticity Price of Demand (PED)?
Measure of responsiveness of the quantity demanded of a good or service to a change in its price
What is the formula for PED?
% change of QD / % change of P
Which are the different elasticities of PED?
- Perfectly inelastic : PED = 0
- Unitary elasticity: PED = 1
- Inelastic: 0
Which factors affect elasticity?
- availability of substitute goods
- product durability
- adjustment period
- share of income represented by the consumption of the good
What is Elasticity Income of Demand (YED)?
Measure of responsiveness of the quantity demanded of a good or service to a change in the income of the consumer
What is the formula for YED?
% change QD / % change Income
What are the types of elasticities of income of demand?
-Normal: YED > 0
- Necessary: 1 > YED > 0
- Superior: YED > 1
- Neutral: YED = 0
- Inferior: YED
What is Elasticity Cross of Demand (XED)?
Measure defines as the percentage change in quantity demanded of good A by the percentage change in the price of good B
What is the formula for XED?
% change QDA / % change PB
What are the types of XED elasticities?
Substitutes: XED > 0
Independent: XED = 0
Complements: XED
What is Price Elasticity of Supply (PES)?
Measure of how much the supply of a product changes when there is a change in the price of the product
What is the formula for PES?
% change QS / % change P
What is the equilibrium point?
Point where the quantity demanded equals the quantity supplied
