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Chapter 5: Q.10 (page 130)

What is the formula for calculating elasticity?

Short Answer

Expert verified

Elasticity is computed by dividing the % variation in quantity over the % variation in price.

Step by step solution

01

Step 1. Definition:

Elasticity is a term used in economics to describe how sensitive one parameter is to variations in other.

02

Step 2. Formula:

The ratio among the percentage variation in quantity demanded or supplied and the equivalent percent variation in price is known as elasticity (E). The formula to compute the elasticity is given below:

E=%changeinquantity%changeinprice

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Most popular questions from this chapter

Assume that the supply of low-skilled workers is fairly elastic, but the employers’ demand for such workers is fairly inelastic. If the policy goal is to expand employment for low-skilled workers, is it better to focus on policy tools to shift the supply of unskilled labor or on tools to shift the demand for unskilled labor? What if the policy goal is to raise wages for this group? Explain your answers with supply and demand diagrams.

Under which circumstances does the tax burden fall entirely on consumers?

The ability of firms to enter and exit a market over time means that, in the long run,

a. the demand curve is more elastic.

b. the demand curve is less elastic.

c. the supply curve is more elastic.

d. the supply curve is less elastic.

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

What is the formula for elasticity of savings with respect to interest rates?
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