(Y11 Economics) Elasticity

Elasticity

The extent of sensitivity to a change in a variable.

Price elasticity of demand

Responsiveness of demand due to change in price.

Elastic

Percentage change in demand will be greater than percentage change in price.

Inelastic

Percentage change in price will be greater than percentage change in demand.

Elastic goods

When a small change in price significantly affects the quantity demanded, usually happens for unessential goods.

Inelastic goods

Quantity demanded isn’t affected as much by price change, such as essential goods.

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

Calculating Price Elasticity of Demand(P.E.D)

P.E.D=percentage change in quantity(effect)/Percentage change in price

Formula for percentage change

change in quantity/price divided by original price or quantity x100

Elasticity Co-Efficient (value,description and explanation)

\-0,perfect inelastic,price has no effect on demand (no law of demand)

Formula for Price Elasticity of Demand

Change in quantity

\----------------

original quantity

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change in price

\-----------------

original price

Formula for MidPoint measuring elasticity

change in quantiity

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quantity average

\-----------------------------------------------------

change in price

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price average

price elasticity of supply

how sensative quantiity supplied is to a change in price

elastic supply

quantity supplied can quickly be increased or reduced to match change in price e.g manufacturing

inelastic supply

quantity supplied cannot change quickly due to a change in price e.g agriculture

formula for price elasticy of supply

%change in quantiity supplied

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%change in price

Factors that impact price elasticity of supply

šTime

š

šNature of the industry

š

šLevel of or ability to hold stock

šspare capacity

š

šFlexibility of Resources eg. capital and labour