PRICE ELASTICITY OF DEMAND ELASTIC--Typically above equilibrium price: When price increases and total revenue decreases the elasticity of demand is elastic When price decreases and total revenue increases the elasticity of demand is elastic When price increases or decreases and total revenue remains the same the elasticity of demand is unitary elastic INELASTIC--Typically below equilibrium price: When price increases and total revenue increases the elasticity of demand is inelastic When price decreases and total revenue decreases the elasticity of demand is inelastic Price Elasticity of Demand coefficient: % change in the quantity of demand DIVIDED BY the % change in the price. If the result is GREATER than 1=ELASTIC If the result is LESS than 1=INELASTIC If the result is EQUAL to 1=UNIT ELASTIC Income Elasticity= % change in quantity demanded/% change in INCOME Negative result=inferior good Positive result=normal good Cross Price elasticity= % change in qty of X / % change in price of Y Negative result=complementary goods Positive result=substitute goods Price elasticity of supply= % change in S / % change in P If the result is GREATER than 1=ELASTIC If the result is LESS than 1=INELASTIC |