Assignment No.

3
Elasticity of Demand and Supply

SCORE
Submitted by:
Tan, Melissa A.
Asenas, Rizaldy

Submitted to:
Prof. Ma. Felina B. Magillano

1. Find out the formula for computing elasticity of demand and

supply.
Calculating the Price Elasticity of Supply:
Changequantity supplied
PEoS =
%Change Price
If PEoS > 1 then Supply is Price Elastic (Supply is sensitive to price
changes)
If PEoS = 1 then Supply is Unit Elastic
If PEoS < 1 then Supply is Price Inelastic (Supply is not sensitive to
price changes)
*Note: Always Positive
Calculating the Price Elasticity of Demand:
Changequantity demanded
PEoD =
%ChangePrice
If PEoD > 1 then Demand is Price Elastic (Demand is sensitive to price
changes)
If PEoD = 1 then Demand is Unit Elastic
If PEoD < 1 then Demand is Price Inelastic (Demand is not sensitive to
price changes)
*Note: Always Positive
2. Show sample computation for each.
3. Interpret the result for your computation.
Price Elasticity of Supply:
Ex.
Given the following data, calculate the price elasticity of supply when the
price changes from $9.00 to $10.00.

Given:
Price (OLD) = 9
Price (NEW) = 10
QSupply (OLD) = 150
QSupply (NEW) = 210
Solution:
% Change in Quantity Supplied

QSupply ( New )QSupply (Old)

QSupply( Old)

100
=

210150
150

x 100

= 0.4 x 100
= 40%
% Change in Price =

109
9

Price ( New )Price(Old )

Price(Old)

x 100

x 100

= 0.11 x 100
= 11.11%
PEoS =

Changequantity supplied
%ChangePrice
40
11.11

= 3.60
Since 3.60 is greater than 1 we can conclude that the supply is Price
Elastic (Supply is sensitive to price changes)
Price Elasticity of Demand:
Ex.
Given the following data, calculate the price elasticity of demand when the
price changes from $9.00 to $10.00

Given:
Price (OLD) = 9
Price (NEW) = 10
QDemand (OLD) =150
QDemand (NEW) =110

Solution:
% Change in Demanded

QDemanded ( New ) QDemanded(Old )

QDemanded(Old )

100
=

110150
150

x 100

= 0.2667 x 100 (*ignore negative sign)

= 26.67%
% Change in Price =

109
9

Price ( New )Price(Old )

Price(Old)

x 100

x 100

= 0.11 x 100
= 11.11%
PEoD =

Changequantity demanded
%ChangePrice
26.67
11.11

= 2.40
Since 2.40 is greater than 1we can conclude that the demand is Price
Elastic (Demand is sensitive to price changes)