Price Elasticity of Demand and Supply: Formulas and Examples
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Elasticity
Elastic demand: A high responsiveness of quantity demanded or supplied to changes in price.
Elasticity: An economics concept that measures the responsiveness of one variable to changes in another variable.
Inelastic demand: A low responsiveness by consumers to price changes.
Necessities vs. Luxuries
Necessities tend to have inelastic demands, whereas luxuries have elastic demands.
Short Run Versus Long Run
Price elasticity of demand is usually lower in the short run, before consumers have much time to react, than in the long run, when they have a greater opportunity to find substitute goods. Thus, demand is more price elastic in the long run than in the short run.
Competitive Dynamics
Goods that can only be produced by one supplier generally... Continue reading "Price Elasticity of Demand and Supply: Formulas and Examples" »