ELASTICITY OF DEMAND AND SUPPLY

Apique, Dallen Yvon

Umpoc, Nerwejohn
Clemente, Christen Marie

Change is constant, it is inevitable. In economics, when there is change, there is

response, good and bad, it depends on the situation and what changes are made.

During our research, we have been able to define what Elasticity is and the three

degrees that comes with it. Elasticity is a measure of how much buyers and sellers

respond to changes in market conditions. Changes or factors such as the price of the

good, the income of the consumers or the substitute of a good. These changes will

greatly affect the demand or the amount supplied in respond to it. There are three

degrees of elasticity in terms of how responsive demand and supply are: Elastic,

Inelastic and Unitary. If there is a change of a determinant, and if in turn it will lead to a

greater change in demand or supply, it is called Elastic, in which the coefficient of the

elasticity is greater than 1. If there is a change in a determinant and in turn it will lead to

proportionately lesser change in demand or supply, it is called Inelastic, in which the

coefficient of the elasticity is lesser than 1. If there is a change in a determinant and in

turn will lead to a proportionately equal change in demand or supply, it is called Unitary,

in which the coefficient of the elasticity is equal to 1.

The Elasticity of Demand measures the percentage change in quantity

demanded for a percentage change in the price. Simply, the relative change in demand

for a commodity as a result of a relative change in its price is called as the elasticity of
demand. There are three types of elasticity of demand that deals with the responses to

a change in the price of the good itself, in income, and in the price of a related good,

which is a substitute or a complement. In ED, there are 3 ways to solve it, the Price

Elasticity of Demand which deals with the price changes, Income Elasticity of Demand

which deals with income changes and Cross Price Elasticity of Demand which deals

with substitute and complements of a good or product.

The price elasticity of supply measures the responsiveness of the producers to

price change. If there is a price change, how will it affect the quantity supplied by the

producers? That is Elasticity of Supply. Inelastic supply which means if there is a

change in price and it does not result in an equivalent change in the supply because the

product has many substitutes and it is not a basic necessity. Elastic supply if the change

in supply is more than the percent change in price like as the price increases to one

percent, the supply increases more than one percent, this goods are more of a basic

necessities that’s why people won’t react for the price, because they need it in their life.

Supply is unitary if an increase in price also get an equivalent increase in the supply, it

is equal. In solving the elasticity of demand and supply, the same formula is used.

We’d been able to demonstrate the formula used in front of the class and

learned from it. In Economics, we will get to learn how these changes or factors will

greatly and immensely affect the demand and supply of a good, why, how and how to

compute the elasticity of elasticity.