ELASTICITY

ELASTICITY:

• An elasticity is a measure of the sensitivity of one variable to another.
• Percentage change that will occur in one variable in response to a percentage change in another variable.

POINT ELASTICITY:

• Elasticity at a given point on a function.

ARC ELASTICITY:

• Average elasticity over a given range of a function. 

Elasticity of demand(Ed) = (% DQ) /(% DFd)

Elasticity of supply(Es) = (% DQ) /(% DFd)

DETERMINANTS OF ELASTICITY:

      SUPPLY

• Flexibility of inputs
• Mobility of inputs
• Durability
• Time
• Availability to produce substitute inputs 

DEMAND:

• Price of own good
• Price of substitutes or compliments 
• Income of consumers
• Advertising or other promotional measures