If you want to know how responsive one variable is to a change in another variable

You need uh... Elasticity, Elasticity

What is percent delta quantity divided by percent delta price?
You get uh... Elasticity, Elasticity
You can find elasticity also by using the midpoint formula
With just uh... Elasticity, Elasticity

The midpoint formula is (Q2-Q1)/[(Q2+Q1)/2] / (P2-P1)/[(P2+P1)/2]

What’s the deal with elasticity coefficient?... Elasticity, Elasticity

Something is elastic if its elasticity coefficient is greater than one, it’s unit elastic if its elasticity
coefficient is 1, and it’s inelastic if its elasticity coefficient is less than one.

When is a curve perfectly inelastic or elastic?... Elasticity, Elasticity

On a graph, demand and supply curves are perfectly elastic if their curves are horizontal and
demand and supply are perfectly inelastic if their curves are vertical

How does elasticity affect total revenue?... Elasticity, Elasticity

When something is elastic a price increase decreases total revenue, when something is elastic
a price decrease increases total revenue, when something is unit elastic, a price change doesn’t
affect total revenue, and when something is inelastic a price increase, increases total revenue
and a price decrease decreases total revenue.

Uh... Elasticity, Elasticity

Substitutes and timeframes...

They determine... price Elasticity, Elasticity of demand

The share of income and whether a good is a luxury or necessity...

They determine uh... price Elasticity, Elasticity of demand

Number of producers, spare capacity…

They determine price Elasticity, Elasticity (of supply)

Ease of switching, Ease of storage, Length of production period, Time period of training, Factor
mobility, and Reaction of costs

They determine price Elasticity, Elasticity (of supply.)

Negative income elasticity of demand is linked with inferior goods

A rise in income will lead to a drop in demand

Income, Elasticity.
Positive income elasticity of demand is linked with normal goods

A rise in Income will lead to a rise in Demand.

Income, Elasticity

Income Elasticity is measured in YED

% ΔQ D
YED is =
% ΔY

Income, Elasticity

We can interpret the demand with a few signs…

If the sign is negative, and elasticity is either elastic or inelastic, the good is inferior.
If the sign is 0, and the elasticity is perfectly inelastic, the good is an absolute necessity
If the sign is positive, and the elasticity is inelastic, it is a normal necessity
If the sign is positive, and the elasticity is elastic, it is a normal luxury.

What measures how a change in the price of one good will affect the quantity demanded of
another good?

Cross Price, Elasticity

% ΔQ D of Good A
What is Cross Price Elasticity? XED. XED =
% ΔP of Good B

Cross Price, Elasticity

The magnitude of elasticity tells us which goods are substitutes or complements.

If the sign is negative, and perfectly elastic, it is a perfect complement(s) that must be
consumed in fix proportions.

If the sign is negative, and elastic, it is a highly complementary good.

If the sign is negative, and inelastic, it is somewhat complementary good.

If the sign is 0 and so is the elastic, it is unrelated.

If the sign is positive, and inelastic, it is somewhat substitutable.

If the sign is positive, and elastic, it is very substitutable.

If the sign is positive, and perfectly elastic, it is a perfect substitute.

This is... Cross Price, Elasticity

Elasticity, Elasticity
Elasticity, Elasticity