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Price Elasticity of Demand

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About this unit

This unit begins the study of product markets: the markets for the goods and services produced. In this unit, you will begins the study of product markets, focusing on the supply and demand model. Students will be introduced to the determinants of demand and supply, market equilibrium, and how changes in equilibrium occur when supply and demand change. Then, build on the supply and demand model to deepen your economics toolkit with the concepts of elasticity, consumer and producer surplus, and the impact of government policies.

AP® is a registered trademark of the College Board, which has not reviewed this resource.

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Supply and Demand | AP®︎/College Microeconomics | Economics | Khan Academy

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This unit begins the study of product markets: the markets for the goods and services produced. In this unit, you will begins the study of product markets, focusing on the supply and demand model. Students will be introduced to the determinants of demand and supply, market equilibrium, and how changes in equilibrium occur when supply and demand change.

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Price Elasticity of Supply

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If you're seeing this message, it means we're having trouble loading external resources on our website.

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About this unit

This unit begins the study of product markets: the markets for the goods and services produced. In this unit, you will begins the study of product markets, focusing on the supply and demand model. Students will be introduced to the determinants of demand and supply, market equilibrium, and how changes in equilibrium occur when supply and demand change. Then, build on the supply and demand model to deepen your economics toolkit with the concepts of elasticity, consumer and producer surplus, and the impact of government policies.

AP® is a registered trademark of the College Board, which has not reviewed this resource.

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Supply and Demand | AP®︎/College Microeconomics | Economics | Khan Academy

# data[].attributes.attachment_link.description
This unit begins the study of product markets: the markets for the goods and services produced. In this unit, you will begins the study of product markets, focusing on the supply and demand model. Students will be introduced to the determinants of demand and supply, market equilibrium, and how changes in equilibrium occur when supply and demand change.

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APMic Unit 2 Lesson 3 - Elasticity Flashcards | Quizlet

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Start studying APMic Unit 2 Lesson 3 - Elasticity. Learn vocabulary, terms, and more with flashcards, games, and other study tools.

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1. What is the definition of elasticity?

2. How is the price elasticity of demand calculated?

3. What are the determinants of price elasticity of demand?

4. What is the relationship between elasticity and total revenue?

5. What is the difference between elastic and inelastic demand?

6. How does the price elasticity of demand change along a demand curve?

7. What are the factors that determine price elasticity of demand?

8. What does the cross-price elasticity of demand measure?

9. What is the meaning and importance of the income elasticity of demand?

10. What is the significance of the price elasticity of supply?

11. What factors influence the size of these various elasticities?

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Define measures of elasticity.

Explain (using graphs where appropriate) measures of elasticity and the impact of a given price change on total revenue or total expenditure.

Calculate (using data from a graph or a table as appropriate) measures of elasticity.

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Individuals and firms respond to incentives and face constraints.

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Economists use the concept of elasticity to measure the magnitude of percentage changes in quantity owing to any given changes in the own-price, income, and prices of related goods.

Price elasticity of demand is measured by the percentage change in quantity demanded divided by the percentage change in price or the responsiveness of the quantity demanded to changes in price. Elasticity varies along a linear demand curve, meaning slope is not elasticity.

Ranges of values of elasticity of demand are described as elastic or inelastic with the separating benchmark being a magnitude of 1, where the change in the price and the change in the quantity demanded are proportional.

When the magnitude of the value of elasticity is greater than 1, the demand is described as being elastic with respect to that price in the range of the given change.

When the magnitude of the value of elasticity is less than 1, the demand is described as being inelastic with respect to that price in the range of the given change.

When the magnitude of the value of elasticity is equal to 1, the demand is described as being unit elastic with respect to that price in the range of the given change.

The price elasticity of demand depends on certain factors such as the availability of substitutes.

The impact of a given price change on total revenue or total expenditure will depend on whether demand is elastic, inelastic, or unit elastic.

Price elasticity of supply is measured by the percentage change in quantity supplied divided by the percentage change in price, or the responsiveness of the quantity supplied to changes in price.

Ranges of values of elasticity of supply are described as elastic or inelastic with the separating benchmark being a magnitude of 1, where the change in the price and the change in the quantity supplied are proportional.

When the magnitude of the value of elasticity is greater than 1, the supply is described as being elastic with respect to that price in the range of the given change.

When the magnitude of the value of elasticity is less than 1, the supply is described as being inelastic with respect to that price in the range of the given change.

When the magnitude of the value of elasticity is equal to 1, the supply is described as being unit elastic with respect to that price in the range of the given change.

The price elasticity of supply depends on certain factors such as the price of alternative inputs.

Elasticity can be measured for any determinant of demand or supply, not just the price.

Income elasticity of demand is measured by the percentage change in the quantity demanded divided by the percentage change in consumers’ income. Economists use the income elasticity of demand to determine whether a good is normal or inferior.

Cross-price elasticity of demand is measured by the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. Economists use the cross-price elasticity of demand to determine whether goods are substitutes, complements, or not related.

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In Economics, Price Elasticity of Demand (PED) is defined as the responsiveness of quantity demanded to a change in price. It is also the slope of the demand curve. The slope is calculated as rise over run. For example, if I increase the price of a phone from $300 to $500, then how much can I expect my demand to fall by? This answer will depend on various factors mentioned below that will help the firm calculate its Price Elasticity of Demand.

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Price Elasticity of Demand | Intelligent Economist

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In Economics, Price Elasticity of Demand (PED) is defined as the responsiveness of quantity demanded to a change in price. It is also the slope of the demand curve. The slope is calculated as rise over run. For example, if I increase the price of a phone from $300 to $500, then how much can I expect my demand to fall by?

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The term "inferior good" describes a good for which demand decrease as incomes increase. They are the opposite of "normal goods," which are goods for which demand increases as incomes increase (e.g. organic food, cars, or name-brand products). Inferior and normal goods are in a relationship with one another-in other words, inferior goods exist when demand for alternatives to a particular good (normal goods) increases with increased income.

In the event of a recession, as incomes fall pretty much across the board, demand for inferior goods increases (and demand for normal goods decreases). Likewise, when the economy is stronger, the demand for inferior goods decreases (and demand for normal goods increases).

See this table for a clear explanation of the relationship between income increase/decrease and demand for both inferior and normal goods:

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The term "inferior good" describes a good for which demand decrease as incomes increase. They are the opposite of "normal goods," which are goods for which demand increases as incomes increase (e.g. organic food, cars, or name-brand products).

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I like the video; it has a great example. But I cannot use it in class because the narrator uses change in demand when she should be talking about a change in quantity demanded. I just spent over a week discussing the differences in shifts of demand and supply curves and movements along them, and the appropriate terminology. Would it take much effort to just rerecord the voice over?

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Office Hours: Elasticity of Demand | Microeconomics Videos

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I like the video; it has a great example. But I cannot use it in class because the narrator uses change in demand when she should be talking about a change in quantity demanded. I just spent over a week discussing the differences in shifts of demand and supply curves and movements along them, and the appropriate terminology.

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Better. Better at responding means highly responsive. And worse at responding means highly unresponsive.
If France has the highest elasticity of oil demand, it means that France is the most highly responsive out of all countries to the same price change. France is better at responding, because it adapts better. It adapts better because it seems to have more options than other countries do. Perhaps France switches to natural gas or coal.

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Calculating the Elasticity of Demand | Microeconomics Videos

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Better. Better at responding means highly responsive. And worse at responding means highly unresponsive. If France has the highest elasticity of oil demand, it means that France is the most highly responsive out of all countries to the same price change. France is better at responding, because it adapts better.

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The fact that if they don't sell now at a lower price then they will be stuck with reserves
they cannot sell in 10 years. I guess that their opportunity cost has changed.
However I am not sure about the time frame. 10 years seems to be a very long period.

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Elasticity of Demand | Microeconomics Videos

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Elasticity tells us how much quantity demanded changes when price changes. The elasticity of demand is a measure of how responsive quantity demanded is to a change in price. A demand curve is elastic when a change in price causes a big change in the quantity demanded.

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In Economics, Cross Price Elasticity of Demand (XED) is the responsiveness of demand for one good to the change in price of another good. It is the ratio of the percentage change in quantity demanded of good x to the change in price of good y. In business, Cross Elasticity of Demand is important because it will help determine whether or not it is a good move to increase or decrease prices or to substitute one product for another for the purpose of revenue.

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Cross Price Elasticity of Demand | Intelligent Economist

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In Economics, Cross Price Elasticity of Demand (XED) is the responsiveness of demand for one good to the change in price of another good. It is the ratio of the percentage change in quantity demanded of good x to the change in price of good y.

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Income Elasticity of Demand (YED) is the responsiveness of demand when a consumer's income changes. It is the ratio of the change in quantity demand over the change in income. YED is useful for governments and firms to help them decide on what goods to produce and how a change in overall income in the economy affects the demand for their products, i.e. whether it's inelastic or elastic.

YED can be positive or negative, depending on the type of good. A normal good has a positive sign, while an inferior good has a negative sign.

For example, if a person experiences a 20% increase in income, the quantity demanded for a good increased by 20%, then the income elasticity of demand would be 20%/20% = 1. This would make it a normal good.

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Income Elasticity of Demand | Intelligent Economist

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Income Elasticity of Demand (YED) is the responsiveness of demand when a consumer's income changes. It is the ratio of the change in quantity demand over the change in income. YED is useful for governments and firms to help them decide on what goods to produce and how a change in overall income in the economy affects the demand for their products, i.e.

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In Economics, Price Elasticity of Supply is the responsiveness of quantity supplied when the price of the good changes. It the ratio of the percentage change in quantity supplied to the percentage change in price. Price Elasticity of Supply is always positive, because the Law of Supply says that quantity supplied increases with an increase in price.

If supply is elastic, producers can increase output without a rise in cost or a time delay

If supply is inelastic, firms find it hard to change production in a given time period.

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Price Elasticity of Supply (PES) | Intelligent Economist

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In Economics, Price Elasticity of Supply is the responsiveness of quantity supplied when the price of the good changes. It the ratio of the percentage change in quantity supplied to the percentage change in price. Price Elasticity of Supply is always positive, because the Law of Supply says that quantity supplied increases with an increase in price.

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Other Elasticities

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About this unit

This unit begins the study of product markets: the markets for the goods and services produced. In this unit, you will begins the study of product markets, focusing on the supply and demand model. Students will be introduced to the determinants of demand and supply, market equilibrium, and how changes in equilibrium occur when supply and demand change. Then, build on the supply and demand model to deepen your economics toolkit with the concepts of elasticity, consumer and producer surplus, and the impact of government policies.

AP® is a registered trademark of the College Board, which has not reviewed this resource.

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Supply and Demand | AP®︎/College Microeconomics | Economics | Khan Academy

# data[].attributes.attachment_link.description
This unit begins the study of product markets: the markets for the goods and services produced. In this unit, you will begins the study of product markets, focusing on the supply and demand model. Students will be introduced to the determinants of demand and supply, market equilibrium, and how changes in equilibrium occur when supply and demand change.

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I am confused by the statement that time horizon influences the elasticity of the curve. I understand that the supply curve is a function
Q = f( P ).
How one can get Q( P1 ) - Q( P2 ) at different times if Q does not depend on time?
And if Q does depend on T,
Q = f(P, T),
then there are immediately questions of direction of the change it time, causality, etc, etc.

I believe this point deserves a much more careful treatment than what is being said in this video.

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Elasticity of Supply | Microeconomics Videos

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Elasticity tells us how much quantity supplied changes when price changes. The elasticity of supply is a measure of how responsive quantity supplied is to a change in price. A supply curve is elastic when a change in price causes a big change in the quantity supplied.

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Elasticity Overview and Tips- Micro Topics 2.3, 2.4, and 2.5

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AP Microeconomics: 2.3-2.4 Price Elasticity of Supply and Demand

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AP Microeconomics: 2.5 Other Elasticities