C3 - ME

elasticity

a measure of the impact of one variable over the other ; measure of how much buyers and sellers respond to changes in market conditions

price elasticity of demand

measure of percent decrease in the quantity demanded of goods and services when there is a percent increase in their price

negative

price and quantity demand have a _______ relationship, as the law of demand states that as prices increases, quantity demand will decrease

perfectly inelastic demand

even if there’s a change in price, the quantity demanded will remain the same. In reality, there are no commodities considered as perfectly inelastic, because all things have a changing demand

Inelastic demand

espite an increase in price, there’s only a minimal decline in quantity demand. Usually, these things are the necessities.

Unit Elastic Demand

the increase price is proportionate to the decrease in quantity demanded

Elastic demand

he increase in price will lead to a higher decrease in quantity demanded. Generally, it means that there are acceptable substitutes for the product

Perfectly elastic demand

is a commodity with an elasticity that equals to infinity. It means that if the price remains the same, you will always have a demand.

income elasticity of demand

Measures the responsiveness of the quantity demanded to a change in consumer

income

normal good

a good that is demanded more as consumers’ income increases

inferior good

a good that is demanded less as consumers’ income increases

old qd

represents the initial value of the quantity demanded

new qd

represents the final value of the quantity demanded

Old Income

represents the initial consumer's income

New Income

represents the final consumer's income

cross-price elasticity of demand

refers to how the quantity desired of one commodity changes in reaction to a change in the price of another related good.

positive

higher than 0 ;

substitutes ;

When one of these commodities' prices rises, buyers tend to buy more of the other.

negative

smaller than 0 ;

complementary ;

When the price of one good rises, the demand for another falls. These items are usually consumed together

close to 0

it indicates that the two goods are unrelated in terms of consumption, which means that price changes in one do not have a major impact on demand for the othe

price elasticity of supply

measure of percent increase in the quantity supplied of goods and services when there is a percent increase in the price of such

Perfectly inelastic supply

even if there’s a change in price, the quantity supply will remain the same. It is a good or service with an elas%city that equals to zero

Inelastic supply

despite an increase in price, there’s only a minimal increase in quan%ty supply. This happens when the product does not have a high market demand, so the producers are preparing not to have an increasing loss

Unit elastic supply

the increase price is propor%onate to the increase in quan%ty supply

Elastic Supply

the increase in price will lead to a higher increase in quan%ty supply.

The producer of an elas%c commodity is very confident that its demand would s%ll

increase and that selling the product is more profitable if it increases its price

Perfectly elastic Supply

is a commodity with an elas%city that equals to infinity. It

means that if the price remains the same, the quan%ty supplied would be infinite.