Elasticity

Index

The Total Outlays Method - 4

Total Outlays - 5

Total Outlays - 6

Total Outlays - 7

Revenue Loss - Revenue Gain - 8

Revenue Loss - Revenue Gain - 9

Inelastic Demand - 10

Inelastic Demand - 11

Elastic Demand - 12

Summary and Solutions - 13

Perfectly Elastic Demand - 14

Perfectly Inelastic Demand - 15

Arc Elasticity of Demand - 16

Calculating Elasticity of Demand - 17

Calculating Elasticity of Demand - 18

Calculating Elasticity of Demand - 19

Factors Effecting Elasticity of Demand- 20

Normal and Inferior Goods - 21

Factors Effecting Elasticity of Supply - 22

Factors Effecting Elasticity of Supply - 23

Factors Effecting Elasticity of Supply - 24

Inelastic Supply - 25

Perfectly Inelastic Supply - 26

Elastic Supply - 27

Factors Effecting Elasticity of Supply - 28

Factors Effecting Elasticity of Supply - 29

Factors Effecting Elasticity of Supply - 30

Cross Elasticity of Demand - 31

Income Elasticity of Demand - 32

Income Inelastic Goods - 33

Income Elasticity - 34

The Arc Elasticity of Demand - 16

The arc elasticity of demand refers to the relationship between changes in price and the subsequent change in quantity demanded.

Q_o is the initial quantity demanded.
Q₁ is the new quantity demanded.
P_o is the initial price.
P₁ is the new price.

The arc elasticity formula is used if the change in price is relatively large. It is more accurate a measure of elasticity than simple ''price elasticity''.

If the arc or price elasticity of demand is greater than 1, demand is said to be elastic. The demand curve has a ''flat'' appearance.

If the arc or price elasticity of demand is less than 1, demand is said to be inelastic. The demand curve has a ''steep'' appearance.