Economics
For this course I highly recommend checking out Jacob Clifford’s Youtube
channel;)
Elasticity
Elasticity is the way to summarize the responsiveness of one variable(effect) to a
change in another variable(cause)
describe how responsive demand/supply of commodity is to a change in price
Elasticity of demand
Ed=% change in quantity demanded/% change in prices=%Q/%P
˙Elastic: {Ed}>1
Inelastic: {Ed}<1
Unit elastic: {Ed}=1
Elasticity of supply
E(s) = deltaQs/Qs/deltaP /P
Cross-price elasticity of demand
Income elasticity of demand:
Taxes and Subsidies
Tax= P(buyers pay)-P(suppliers receive)
Who bears the burden of a tax does not depend on who writes the check to the
government but on elasticities of demand and supply
The less elastic side of the market bears the larger burden
Taxes cause a welfare loss (deadweight loss)
Whoever bears the burden of a tax receives the benefits of a subsidy
wedge short cut:
how the burden of the tax is shared
Economics 1
For this course I highly recommend checking out Jacob Clifford’s Youtube
channel;)
Elasticity
Elasticity is the way to summarize the responsiveness of one variable(effect) to a
change in another variable(cause)
describe how responsive demand/supply of commodity is to a change in price
Elasticity of demand
Ed=% change in quantity demanded/% change in prices=%Q/%P
˙Elastic: {Ed}>1
Inelastic: {Ed}<1
Unit elastic: {Ed}=1
Elasticity of supply
E(s) = deltaQs/Qs/deltaP /P
Cross-price elasticity of demand
Income elasticity of demand:
Taxes and Subsidies
Tax= P(buyers pay)-P(suppliers receive)
Who bears the burden of a tax does not depend on who writes the check to the
government but on elasticities of demand and supply
The less elastic side of the market bears the larger burden
Taxes cause a welfare loss (deadweight loss)
Whoever bears the burden of a tax receives the benefits of a subsidy
wedge short cut:
how the burden of the tax is shared
Economics 1
