Micro Elasticity

Elasticity of Demand

Percent change in Qd / Percent change in price

Elasticity of Supply

Percent change in supply / percent price of price

Elasticity of Income

Percent change in quanitity demand / percent change of income

Elasticity of cross price

Percent change in quantity demanded of good a / percent change in price of good b

Perfectly Inelastic

0, Qd doesn’t react at all into change in price

Inelastic

Between -1 and 0, Quantity demand doesn’t react too much to change in price

Unit elastic

-1 percent change in quantity demanded is same as percent change in price

Elastic

Below -1 to - infinity, Qd changes by bigger percent than price (changes a lot)

Perfectly elastic

-infinity, any price increase Quantity demanded goes to 0

More substitutes means…

More elastic

Slope of graph

Demand curve (down), gets more inelastic as curve goes DOWN

Total Revenue

Price x Quantity

Positive income elasticity

Normal good

Negative income elasticity

inferior good

0 < income elasticity < 1

Normal → necessity

Income elasticity > 1

Normal → Luxury

Cross price elasticity positive

Substitutes

Cross price elasticity = 0

No relation

Cross price elasticity negative

Compelements