ELASTICITY OF DEMAND
Elasticity is the proportional (or percent) change in onevariable due to the proportional change in anothervariable. The formula for elasticity is:
E = percentage change in X / percentage change in Y
Elasticity can either be a positive or a negative value.
When the proportional change in one variable is equal tothe proportional change in the other variable, then it iscalled Unit Elasticity. It can be represented as E = 1.
Elasticity can be relatively elastic (E >1), when theproportional change in x is greater than the proportionalchange in y.
Elasticity can be perfectly inelastic (E = 0), when anychange in y will have no effect on x.
Elasticity can be infinity (E = infinity) or perfectly elasticwhen a change in y will have infinite effect on x.
Elasticity can be less than one (E < 1) i.e., relativelyinelastic when the proportional change in x is less thanthe proportional change in y.