🔹️An elasticity is a measure of the sensitivity of one variable to another. It is the percentage change that occur in one variable in response to a percentage change in another variable.
🔹️Point elasticity is the elasticity at a given point on a function.
🔹️Arc elasticity is the average elasticity over a given range of functions.
Determinants of Elasticity-
🔺️supply
🔸️Flexibility of inputs - Higher the flexiblibilty of an input,higher is it's elasticity.
🔸️Mobility of inputs - higher the mobility of an input,higher is it's elasticity.
🔸️Durability- More the input is durable,higher the elasticity.
🔸️Time - Elasticity is directly proportional to time.
🔸️Ability to produce substitute inputs - It has a directly proportional relation with the elasticity of supply.
🔺️Demand
🔸️Price of own good - The demand elasticity of a product depends upon the price of it's own good
🔸️Price of substitutes/complementary goods - The price elasticity of demand also depends upon the price of its substitute/complimentary goods.
🔸️Income of consumers - Elasticity of demand is directly proportional to the income of it's consumers.
🔸️Advertising /other promotional measures - Elasticity of demand also depends upon the advertising and other promotional measures.
Price elasticity of demand =percentage change in quantity demanded /percentage change in price.
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