Elasticity of Demand
Price elasticity measures the responsiveness of the quantity demanded or supplied of a good
to a change in its price. It is computed as the percentage change in quantity demanded—or
supplied—divided by the percentage change in price.
Elasticity can be described as elastic—or very responsive—unit elastic, or inelastic—not very
responsive.
Elastic demand or supply curves indicate that the quantity demanded or supplied responds to
price changes in a greater than proportional manner.
An inelastic demand or supply curve is one where a given percentage change in price will cause
a smaller percentage change in quantity demanded or supplied.
Unitary elasticity means that a given percentage change in price leads to an equal percentage
change in quantity demanded or supplied.
What is price elasticity?
Both demand and supply curves show the relationship between price and the number of units
demanded or supplied. Price elasticity is the ratio between the percentage change in the
quantity demanded, or supplied and the corresponding percent change in price.
The price elasticity of demand is the percentage change in the quantity demanded of a good
or service divided by the percentage change in the price. The price elasticity of supply is the
percentage change in quantity supplied divided by the percentage change in price.
Elasticities can be usefully divided into five broad categories: perfectly elastic, elastic,
perfectly inelastic, inelastic, and unitary. An elastic demand or elastic supply is one in which
the elasticity is greater than one, indicating a high responsiveness to changes in price.
An inelastic demand or inelastic supply is one in which elasticity is less than one, indicating
low responsiveness to price changes. Unitary elasticities indicate proportional responsiveness
of either demand or supply.
, Perfectly elastic and perfectly inelastic refer to the two extremes of elasticity. Perfectly elastic
means the response to price is complete and infinite: a change in price results in the quantity
falling to zero. Perfectly inelastic means that there is no change in quantity at all when price
changes.
the midpoint method to calculate elasticity
To calculate elasticity, instead of using simple percentage changes in quantity and price,
economists sometimes use the average percent change in both quantity and price. This is called
the Midpoint Method for Elasticity:
Price elasticity measures the responsiveness of the quantity demanded or supplied of a good
to a change in its price. It is computed as the percentage change in quantity demanded—or
supplied—divided by the percentage change in price.
Elasticity can be described as elastic—or very responsive—unit elastic, or inelastic—not very
responsive.
Elastic demand or supply curves indicate that the quantity demanded or supplied responds to
price changes in a greater than proportional manner.
An inelastic demand or supply curve is one where a given percentage change in price will cause
a smaller percentage change in quantity demanded or supplied.
Unitary elasticity means that a given percentage change in price leads to an equal percentage
change in quantity demanded or supplied.
What is price elasticity?
Both demand and supply curves show the relationship between price and the number of units
demanded or supplied. Price elasticity is the ratio between the percentage change in the
quantity demanded, or supplied and the corresponding percent change in price.
The price elasticity of demand is the percentage change in the quantity demanded of a good
or service divided by the percentage change in the price. The price elasticity of supply is the
percentage change in quantity supplied divided by the percentage change in price.
Elasticities can be usefully divided into five broad categories: perfectly elastic, elastic,
perfectly inelastic, inelastic, and unitary. An elastic demand or elastic supply is one in which
the elasticity is greater than one, indicating a high responsiveness to changes in price.
An inelastic demand or inelastic supply is one in which elasticity is less than one, indicating
low responsiveness to price changes. Unitary elasticities indicate proportional responsiveness
of either demand or supply.
, Perfectly elastic and perfectly inelastic refer to the two extremes of elasticity. Perfectly elastic
means the response to price is complete and infinite: a change in price results in the quantity
falling to zero. Perfectly inelastic means that there is no change in quantity at all when price
changes.
the midpoint method to calculate elasticity
To calculate elasticity, instead of using simple percentage changes in quantity and price,
economists sometimes use the average percent change in both quantity and price. This is called
the Midpoint Method for Elasticity:
