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Elasticity - Coggle Diagram
Elasticity
- Price Elasticity of Supply
Midpoint formula = ratio of % change in Qs to % change in P, average the two quantities and prices
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At higher prices, firms are willing and able to produce more; vice versa
- Price Elasticity of Demand
Midpoint formula = ratio of % change in Qd to % change in P, average the two quantities and prices
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Eliminate minus sign: inverse relationship between price and quantity demanded; easier to compare elasticities
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- Income Elasticity of Demand
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Ed<1: inelastic; percentage change in Qd < percentage change in P; not very sensitive to price change
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Ed=infinity: perfectly elastic; consumers increase their purchases from zero to all that they can obtain; horizontal demand curve
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- Determinants of Price Elasticity of Demand
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Proportion of income: other things equal, higher proportion of income = demand is more elastic
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