APPLIED ECONOMICS

Mrs. Mellany M. Calanog, LPT

Teacher
 LESSON 3

ELASTICITY OF SUPPLY AND DEMAND

 OBJECTIVES

• At the end of the lesson, you will be able to:

• * Define elasticity
• * Identify the different kinds of elasticity and
• * Explain and cite examples of the different types of
elasticity
 ELASTICITY

• It is a degree used in response to

changes in the determinants of demand
and supply.
 PRICE ELASTICITY OF DEMAND

• is the ratio of the percentage change in

quantity demanded of a product to the
percentage change in price.
 PRICE ELASTICITY OF SUPPLY

• is the response of quantity offered by

producers for sale for every change in
price.
TYPES OF ELASTICITY

1. Elastic
2. Inelastic
3. Unitary
4. Perfectly elastic
5. Perfectly inelastic
 ELASTIC

• Demand is elastic when a percentage

change in price leads to a greater change
in quantity demanded.
 INELASTIC

• Demand is inelastic when the percentage

change in price leads to a lesser change
in quantity demanded.
 UNITARY

• Demand is unitary when a percentage

change in price is equal to the percentage
change in quantity demanded.
 PERFECTLY ELASTIC

• Demand is perfectly elastic when at a

given price, percentage change in
quantity demanded can change infinitely.
 PERFECTLY INELASTIC

• Demand is perfectly inelastic when a

percentage change in price creates no
change in quantity demanded.
 INCOME ELASTICITY

• The coefficient of income elasticity

measures a product’s percentage change
in quantity as a percentage change in
income which caused the change in
quantity.
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