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ELASTICITY - Coggle Diagram
ELASTICITY
Price elasticity of demand
Elastic- sensitive to price change
Midpoint formula
Elastic and inelastic demand
Inelastic - insensitive to price change
Ed>1 elastic demand
Ed=0 perfectly inelastic
Ed<1 inelastic demand
Ed = infinity perfectly elastic
Ed=1 unit elastic
Price elasticity of supply
Elastic supply, producers are responsive to price change
Inelastic supply, producers are not responsive to price change
Measures sellers responsiveness to price
Es>1 elastic supply
Es<1 inelastic supply
Es=0 perfectly inelastic
Es=1 Unit elastic
Cross elasticity
Substitute goods if elasticity is positive
Complement goods if elasticity s negative
Measures responsiveness of purchases of one good to change the price of another good
independent goods if elasticity is 0
Total revenue test
inelastic demand- Price and total revenue move in the same direction
Price x Quantity
Elastic demand- Price and total revenue move in opposite directions
Income elasticity of demand
Normal goods if elasticity is positive
Inferior goods if elasticity is negative
Measures responsiveness of buyers to changes in their income
Determinants of price elasticity
Proportion of income
time
Substitutability
luxuries versus necessities