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Elasticity
How responsive is demand or supply when price changes
Elasticity formula

Less than 1
inelastic
greater than 1
elastic
Fewer substitutes
inelastic
More substitutes
elastic
Substitutes
positive CPE %DELTA QDX/ %DELTAPY
Complements
Negative CPE CPE %DELTA QDX/ %DELTAPY
IE less than 0
inferior good
IE greater than 1
luxury good
IE between 0 and 1 is
normal good
TR
pricexquantity
A change in price will cause quantity to move in the opposite
direction
► The impact of a change in price P on TR depends on how strongly
consumers respond
► Elasticity depends on the relative magnitude of the percentage
changes in P and Q
PED