Elasticity

Elasticities-

Eladticity	Is a measure of responsiveness. It measures how much something changes when there is a change in one of the factors that determines it.
Elasticity of demand	Elasticity of demand is a measure of how much the demand for a product chages when there is a change in one of the factors that determine demand. PED XED YED
PED	Price elasticity of demand is a measure of how much the quantity demanded of a product changes when there is a change in the price of the product. PED= Percentage change in quantity demanded of the product/percentage change in the price of a product
The range of values of price elasticity of demand	The range can be from zero to infinity but that’s just theoretical If ped is zero then the change has no effect on the quantity demanded
Inelastic demand	The value ped is less than one and greater then zero This means as the price is raised . the quantity demanded will not fall by much and so the revenue gained by the firm will increase.
Elastic demand	The ped is greater then one and less than infinity This means that when the price is raised the total revenue is not raised enough to make more then before
Unit elastic demand	If the price is raised the demand is proportionate
Determinates of price elasticity of demand	The number and closeness of substitutes- People have more things to chose from and will switch brand The necessity of the product – Inelastic because when we don’t get them we die… The time period considered- It takes consumers time to change their buying habits
Price elasticity of demand and taxation	Governments need to take care of taxing products. The price will rise. Quantity demanded will fall and unemployment will happen,
Cross elasticity of demand XED	XED is the measure of how much the demand of a product changes when there is a change in the price of another product. XED= percentage chane in quantity demand for product x/ percentage change in quantiy demand for product Y
RANGE OF vALuES	Positive and negative matters If the number is positive then the two things Are substitutes. If the number is negative then the two goods are compliments Negative- complements Zero- unrelated Positive- substitutes
Income elasticity of demand YED	Income elasticity- how much the demand for a product changes when there is a change in the consumers income. YED= percentage chane in quantity demanded of the product/percentage changein income of the consumer Positive number- normal good, income elastic Nessecery good have low income elassiticy Superior goods have high income elastity Infererior goods- yed is negative- demand decreases as income increases.
Elasricty of supply	Suppæy change as the price changes- PES=percentage change in quantity supplied of the product/Percentage change in price of the From zero to infinity, but extremes do actually happen Less than one its inelastic- Elastic supply- more then one Unit elastic supply- one
Determinates of price elasticity	How much costs rise as output is increased.- The extistance of unused capcity The mobility of factors of production The time period considered The ability to store stock.
Primary commodities	Cotton or coffee- inelastic because they are nessesary to the production of other goods- no substitutes Manufactured goods are more elastic