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Elasticity - Coggle Diagram
Elasticity
Elasticity of Demand
If they are sensitive to a price change it is elastic
If they aren't sensitive to a price change it is ineleastic
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Formula
Change in Quantity demand of product X/ Original quantity demanded of product X / Change in price of Product X/Original Price of X
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Elastic demand Ed > 1
Inelastic demand Ed < 1
Unit Elasticity Ed = 1
Perfect Inelastic Ed = 0
Perfect Elastic Ed = Infinity
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Elasticity of Supply
If Quantity supplied by producers is relatively responsive to price changes, supply is elastic. If it is relatively insensitive, supply is inelastic
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Formula
Percentage change in quantity supplied of product X divided by percentage change in price of product X
The degree of price elasticity of supply depends on how quickly and easily producers can shift resources between alternative uses. The quicker the better price elasticity of supply
Short Run
A period of tie too short to change plant capacity but long enough to use the fixed sixe plant more or less
intensively.
More Labor and Ferilizer
Long Run
A time long enough for firms to adjust their plant sizes and for new firs to enter or leave the industry. Acquire more machinery, land and equipment
Immediate market period
Producers unable to respond to a change in price wuth a change in quantity supplied
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Cross Elasticity
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Substitute Goods
If cross elasticity is positive, meaning that sales of X moves in the same direction as the price of Y
Complimentary Goods
When Cross Elasticity is negative we know X and Y go together an increase in price of price decrease the demand of another
Independent Goods
A zero or near zero cross elasticity suggests that goods are independent from one another
Income Elasticity
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Measures the degree to which consumers respond to change in their incomes by buying more or less of a product
Normal Goods
Ei is Positive, more of these goods are demanded as income rises
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Total Revenue
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Elastic Demand
A decrease in price increases total revenue. Enough units are sold at a lower price to make up for losses
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