Elasticity

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



Elasticity and Total Revenue



Khan Academy-Total Revenue and Elasticity



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






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