ELASTICITY

Price of apple Quantity demanded of apple

8 10
7=P1 15=Q1
6=P0 20=Q0
Price elasticity of demand
Q 1−Q 0 P0
|Ep|= X
Q0 P 1−P 0

Price increases from RM6 to RM7

15−20 6
|Ep|= X
20 7−6
=1.5
=ELASTIC

Price of apple Quantity supply of apple

8 20
7 P1 10 Q1
6 P0 5 Q0

Price elasticity of supply

Q 1−Q 0 P0
Es= X
Q0 P 1−P 0
PRICE INCREASES FROM RM6 TO RM7

10−5 6
Es= X
5 7−6
=6
=ELASTIC
SUBSTITUTE, COMPLEMENTARY OR NOT REALTED

Price of X Quantity demanded of X Quantity demanded of Z

8 P1 5 20 Q1
7 P0 10 10 Q0
6 20 5

Cross elasticity of demand

Q 1−Q 0 P0
Ex= X
Q0 P 1−P 0
PRICE INCREASE FROM RM7 TO RM8
20−10 7
Ex= X
10 8−7
=7
Positive relationship : x and z are substitute goods

Consumer’s income Quantity demanded of X Quantity demanded of Z

1000 Y0 5 Q0 20 Q0
2000 Y1 10 Q1 10 Q1
3000 20 5

Income elasticity of demand

Q1−Q0 Y0
Ey= X
Q0 Y 1−Y 0
Consumer’s income increases from RM1000 to RM3000
Good X
10−5 1000
Ey= X
5 2000−1000
=1
=normal goods

Good Z

10−20 1000
Ey= X
20 2000−1000
= -0.5
=inferior goods