Untitled

Elasticity

A concept in economics measuring the percentage change in quantity due to a percentage change in another factor, often used to determine responsiveness.

Price Elasticity of Demand

Measures how quantity demanded responds to a change in price, calculated as the percentage change in quantity demanded divided by the percentage change in price.

Availability of Close Substitutes

Key factor affecting price elasticities, goods with many substitutes have high elasticities, while those with few substitutes have low elasticities.

Time Horizon

Influences elasticity, with more substitutes becoming available in the long run, increasing elasticity.

Midpoint Method

A technique to calculate percentage changes and elasticities by using the average of two points to avoid different values when going up or down.

Total Revenue

The amount paid by buyers and received by sellers, calculated as the price of the good times the quantity sold.

Income Elasticity of Demand

Measures how quantity demanded responds to a change in consumers' income, computed as the percentage change in quantity demanded divided by the percentage change in income.

Cross Price Elasticity of Demand

Measures how the quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in quantity demanded of the first good divided by the percentage change in the price of the second good.

Price Elasticity of Supply

Measures how the quantity supplied of a good responds to a change in price, calculated as the percentage change in quantity supplied divided by the percentage change in price.