1. CONCEPTS OF ELASTICITY MERCADO, RICH-ANNE M. ORIGENES, MIA
CHERISE P.
2. ELASTICITY ELASTICITY measures the responsiveness of one
variable to a certain change of another variable. ELASTICITY =
percentage change in variable y percentage change in variable
x
3. ELASTICITY OF DEMAND Is a measure of the degree of
responsiveness of quantity demanded of a product to a given change
in one of the independent variables which affect demand for that
product.
4. CLASSIFICATIONS OF ELASTICITY OF DEMAND PRICE ELASTICITY OF
DEMAND - Is the responsiveness of demand to change in price of the
good sold. INCOME ELASTICITY OF DEMAND - Is the responsiveness of
demand to change in their income. CROSS ELASTICITY OF DEMAND - Is
the responsiveness of demand for a certain good, in relation to
changes in price of other related goods.
5. PRICE ELASTICITY OF DEMAND = % %
6. PRICE ELASTICITY OF DEMAND = % % ELASTIC DEMAND
7. EXAMPLE
8. DEGREE OF PRICE ELASTICITY OF DEMAND = % % INELASTIC
DEMAND
9. EXAMPLE
10. DEGREE OF PRICE ELASTICITY OF DEMAND = % % UNITARY ELASTIC
DEMAND
11. EXTREME CASES OF PRICE ELASTICITY OF DEMAND PERFECTLY
ELASTIC DEMAND - Demand is totally responsive to changes in price.
PERFECTLY INELASTIC DEMAND - Demand totally does not respond to any
changes in price.
12. EXTREME CASES OF PRICE ELASTICITY OF DEMAND
13. DETERMINANTS OF PRICE ELASTICITY OF DEMAND 1. IMPORTANCE OR
DEGREE OF NECESSITY OF THE GOODS. 2. NUMBER OF AVAILABLE
SUBSTITUTES. 3. THE PROPORTION OF INCOME IN PRICE CHANGES. 4. TIME
PERIOD.
14. INCOME ELASTICITY OF DEMAND = % %
15. NORMAL & INFERIOR GOODS NORMAL GOOD - Means that as
income increases, more goods and services will be demanded.
INFERIOR GOOD - Means that as income rises, quantity demand for
such good declines.
16. LUXURY & NECESSITY GOODS LUXURY GOOD - Are normal goods
with an elasticity coefficient greater than 1. NECESSITY GOOD - Are
normal goods with an income elasticity of less than 1 yet still
manifest positive result.
17. ELASTICITY OF SUPPLY Refers to the reaction or response of
the sellers or producers to price changes of good sold. In other
words, it is a measure of the degree of responsiveness of supply to
a given change in price.
18. PRICE ELASTICITY OF SUPPLY EQUATION = % %
19. DEGREE OF PRICE ELASTICITY OF SUPPLY ELASTIC SUPPLY - A
change in price leads to a greater change in quantity supplied.
INELASTIC SUPPLY - A change in price leads to a lesser change in
quantity supplied. UNITARY ELASTIC SUPPLY - A change in price leads
to an equal change in quantity supplied.
20. EXTREME CASES OF PRICE ELASTICITY OF SUPPLY PERFECTLY
ELASTIC SUPPLY - This occurs when there is no change in price, and
there is an infinite change in quantity supplied. PERFECTLY
INELASTIC SUPPLY - This happens when a change in price has no
effect on quantity supplied.
21. DETERMINANTS OF PRICE ELASTICITY OF SUPPLY 1. MONETARY OR
INTERMIDIATE. 2. SHORT-RUN. 3. LONG-RUN.