(Y11 Economics) Elasticity
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17 Terms
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Elasticity
The extent of sensitivity to a change in a variable.
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Price elasticity of demand
Responsiveness of demand due to change in price.
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Elastic
Percentage change in demand will be greater than percentage change in price.
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Inelastic
Percentage change in price will be greater than percentage change in demand.
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Elastic goods
When a small change in price significantly affects the quantity demanded, usually happens for unessential goods.
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Inelastic goods
Quantity demanded isn’t affected as much by price change, such as essential goods.
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Factor affecting price of elasticity
TTAMI
T-Time
T-The proportion of income spent
A-Availability of substance
M-Market breadth
I-is the good neccecity or luxury
T-Time
T-The proportion of income spent
A-Availability of substance
M-Market breadth
I-is the good neccecity or luxury
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Calculating Price Elasticity of Demand(P.E.D)
P.E.D=percentage change in quantity(effect)/Percentage change in price
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Formula for percentage change
change in quantity/price divided by original price or quantity x100
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Elasticity Co-Efficient (value,description and explanation)
\-0,perfect inelastic,price has no effect on demand (no law of demand)
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Formula for Price Elasticity of Demand
Change in quantity
\----------------
original quantity
\--------------------------------------------------------------------
change in price
\-----------------
original price
\----------------
original quantity
\--------------------------------------------------------------------
change in price
\-----------------
original price
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Formula for MidPoint measuring elasticity
change in quantiity
\------------------------
quantity average
\-----------------------------------------------------
change in price
\------------------
price average
\------------------------
quantity average
\-----------------------------------------------------
change in price
\------------------
price average
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price elasticity of supply
how sensative quantiity supplied is to a change in price
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elastic supply
quantity supplied can quickly be increased or reduced to match change in price e.g manufacturing
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inelastic supply
quantity supplied cannot change quickly due to a change in price e.g agriculture
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formula for price elasticy of supply
%change in quantiity supplied
\---------------------------------------------
%change in price
\---------------------------------------------
%change in price
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Factors that impact price elasticity of supply
Time
Nature of the industry
Level of or ability to hold stock
spare capacity
Flexibility of Resources eg. capital and labour
Nature of the industry
Level of or ability to hold stock
spare capacity
Flexibility of Resources eg. capital and labour
Note 
Flashcards (34)