Elasticity: a measurement of how much one variable changes due to a change in another variable.
Elastic: category of elasticity where a change in one variable (usually price) brings about a relatively greater change in the other variable (usually demand).
a) For example: fresh garden vegetables. During winter time these products’ prices go higher which causes a relatively large decrease in demand; this happens the other way around during summer time.
a) For example: fresh garden vegetables. During winter time these products’ prices go higher which causes a relatively large decrease in demand; this happens the other way around during summer time.
a- At $3 only 2 units are demanded.
b- At $2 only 5 units are demanded. The price decreases by one-third, the demand more than doubles.
-Much less steep line
Inelastic: category of elasticity where a change in one variable (usually price) bring about a relatively slighter change in the other variable (usually demand).
a) For example: table salt; a decrease or increase in the price of this product will not create a change on how much people demand for it.
a) For example: table salt; a decrease or increase in the price of this product will not create a change on how much people demand for it.
a- At $3, 2 units are demanded.
b- At $2, 2.5 units are demanded. The price decreases by one-third, the demand only increased by 25 percent.
- Much more steep line.
Unit Elastic: a category of elasticity where a change in one variable (usually price) bring about a proportional or equal change in the other variable (usually demand).
For example: it is very hard to locate an example of unit elastic because the demand for most goods is either elastic or inelastic. This category serves more as a “middle ground that separates the other two categories.” (Glencoe Economics, page 105)
At $3, 2 units are demanded.
At $2, 3 units are demanded. The price decreases by one-third and the demand increases by one-third.
At $2, 3 units are demanded. The price decreases by one-third and the demand increases by one-third.
-Average steep line
Elasticity Formula: (Percent change in quantity demanded)/(Percent change in price). If the answer is greater than 1, it is elastic; less than 1, inelastic; and 1, unit elastic.
