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Chapter 5: Q. 10 (page 130)

What is the formula for calculating elasticity?

Short Answer

Expert verified

PriceElasticityofDemand=percentchangeinquantitypercentchangeinprice.

Step by step solution

01

Step 1. Definition

Elasticity is a term used in economics to describe how the cumulative amount requested of a product or service changes as the price of that thing or service changes. If the quantity demand for a product varies more than proportionately as its price rises or lowers, it is said to be elastic.

02

Step 2. Explanation

Elasticity is a measure of responsiveness that is computed by dividing one variable's percentage change by another's percentage change.

For instance, price elasticity can be obtained by the ratio of change in quantity and change in price.

Priceelasticity=%Changeinquantity%Changeinprice

Income elasticity can be obtained by the ration of change in quantity and change in income.

Incomeelasticity=%changeinquantity%changeinincome

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Most popular questions from this chapter

If supply is elastic, will shifts in demand have a larger effect on equilibrium quantity or on price?

The equation for a demand curve is P = 48 – 3Q.

What is the elasticity in moving from a quantity of 5 to

a quantity of 6?

Would you usually expect elasticity of demand or supply to be higher in the short run or in the long run? Why?

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The supply of paintings by Leonardo Da Vinci, who painted the Mona Lisa and The Last Supper and died in 1519, is highly inelastic. Sketch a supply and demand diagram, paying attention to the appropriate elasticities, to illustrate that demand for these paintings will determine the price.

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