LUXURIES VS NECISSITIES:
In general price elasticity of
CROSS ELASTICITY OF DEMAND:
The ratio of the percentage change
Exy = (% change sin quantity
in quantity demanded of one good
demanded of product X) / (%
to the percentage change in the
change in price of product Y)
price of some other good. A
positive coefficient indicates the
Exy = 0 means that the product are two products are substitute goods;
independent a negative coefficient indicates
they are complementary goods.
s smaller than 1 = inelastic supply
s bigger than 1 = elastic supply
Es = (% change in quantity
s = 1 = unit elastic supply
supplied of product X) / (% change
in price of product X
Es is never negative
IMMEDIATE MARKET PERIOD:
The length of time during which
the producers of a product are
unable to change the quantity
supplied in response to a change
in price and in which there is a
perfectly inelastic supply
SHORT RUN:
In microeconomics, a period of
time in which producers are able to
change the quantities of some but
not all of the resources they
employ; a period in which some
resources (usually plant) are fixed
and some are variable.
LONG RUN:
In microeconomics, a period of
time long enough to enable
producers of a product to change
the quantities of all the resources
they employ, so that all resources
and costs are variable and no
resources or costs are fixed
ANTIQUES AND
REPRODUCTIONS:
*Antiques = inelastic supply
*Reproductions = more elastic
APPLICATION OF PRICE
supply
ELASTICITY OF SUPPLY
VOLITILE GOLD PRICES:
Inelastic supply
demand is higher than that of
necessities.
SUBSTITUTIBILITY:
The more substitutes are available,
TIME:
the greater the price elasticity of
Generally, product demand is more
demand.
elastic over time.
PROPORTION OF INCOME:
Other things equal, the higher the
DETERMINANTS OF PRICE price of good relative to the
ELASTCITY OF DEMAND consumer's income, the greater
the price of elasticity of demand
INELASTIC:
Substantial changes to price
causes a small change in demand.
PRICE ELASTICITY OF DEMAND:
 
ELASTIC:
The ratio of the percentage change
Substantial changes to price
in quantity demanded of a product
causes a very large change in
or resource to the percentage
demand
change in its price; a measure of
ELASTICITY the responsiveness of buyers to a
change in the price of a product or Ed bigger than 1 = elastic
resource. Ed=(change in quantity/sum of Ed smaller than 1 = inelastic
quantity/2) / (change in price/sum Ed = 1 = unit elasticity
of price/2) Ed = 0 = perfectly Inelastic
Ed = infinity = perfectly elastic
PRICE ELASTICITY OF SUPPLY: TOTAL REVENUE TEST
TOTAL REVENUE:
Measures the seller's The total amount the seller TOTOAL REVENUE = PRICE X
responsiveness to price changes
receives from the sale of the QUANTITY
  product in a particular time period.
*Elastic supply = producers are
responsive to price changes.
*If total revenue changes in the
*Inelastic supply = producers are
opposite direction of price,
not responsive to price changes
demand is elastic.
*If total revenue changes is in the
same direction of the price,
demand is inelastic.
INCOME ELASTICITY OF
DEMAND:
The ratio of the percentage change
Ei = (% change in quantity *Ei is bigger than 0 = superior
in the quantity demanded of a
demanded) / ( % change in goods
good to a percentage change in
income) Ei smaller than 0 = inferior goods
consumer income; measures the
responsiveness of consumer
purchases to income changes.
ELASTICITY
1. DETERMINANTS OF PRICE ELASTCITY OF DEMAND
1.1. SUBSTITUTIBILITY: The more substitutes are available, the greater the price elasticity of demand.

1.2. PROPORTION OF INCOME: Other things equal, the higher the price of good relative to the consumer's income, the greater the price of elasticity of
demand

1.3. LUXURIES VS NECISSITIES: In general price elasticity of demand is higher than that of necessities.

1.4. TIME: Generally, product demand is more elastic over time.

2. PRICE ELASTICITY OF DEMAND: The ratio of the percentage change in quantity demanded of a product or resource to the
percentage change in its price; a measure of the responsiveness of buyers to a change in the price of a product or resource.
2.1. INELASTIC: Substantial changes to price causes a small change in demand.

2.2. ELASTIC: Substantial changes to price causes a very large change in demand
2.3. Ed=(change in quantity/sum of quantity/2) / (change in price/sum of price/2)

2.3.1. Ed bigger than 1 = elastic Ed smaller than 1 = inelastic Ed = 1 = unit elasticity Ed = 0 = perfectly Inelastic Ed = infinity = perfectly elastic

3. TOTAL REVENUE TEST

3.1. TOTAL REVENUE: The total amount the seller receives from the sale of the product in a particular time period.

3.1.1. TOTOAL REVENUE = PRICE X QUANTITY

3.2. *If total revenue changes in the opposite direction of price, demand is elastic. *If total revenue changes is in the same direction of the price, demand is
inelastic.

4. INCOME ELASTICITY OF DEMAND: The ratio of the percentage change in the quantity demanded of a good to a percentage
change in consumer income; measures the responsiveness of consumer purchases to income changes.
4.1. Ei = (% change in quantity demanded) / ( % change in income)

4.1.1. *Ei is bigger than 0 = superior goods Ei smaller than 0 = inferior goods

5. PRICE ELASTICITY OF SUPPLY: Measures the seller's responsiveness to price changes *Elastic supply = producers are
responsive to price changes. *Inelastic supply = producers are not responsive to price changes
5.1. Es = (% change in quantity supplied of product X) / (% change in price of product X
 5.1.1. Es smaller than 1 = inelastic supply Es bigger than 1 = elastic supply Es = 1 = unit elastic supply

5.1.2. Es is never negative

5.2. IMMEDIATE MARKET PERIOD: The length of time during which the producers of a product are unable to change the quantity supplied in response to
a change in price and in which there is a perfectly inelastic supply

5.3. SHORT RUN: In microeconomics, a period of time in which producers are able to change the quantities of some but not all of the resources they
employ; a period in which some resources (usually plant) are fixed and some are variable.

5.4. LONG RUN: In microeconomics, a period of time long enough to enable producers of a product to change the quantities of all the resources they
employ, so that all resources and costs are variable and no resources or costs are fixed

5.5. APPLICATION OF PRICE ELASTICITY OF SUPPLY

5.5.1. ANTIQUES AND REPRODUCTIONS: *Antiques = inelastic supply *Reproductions = more elastic supply

5.5.2. VOLITILE GOLD PRICES: Inelastic supply

6. CROSS ELASTICITY OF DEMAND: The ratio of the percentage change in quantity demanded of one good to the percentage
change in the price of some other good. A positive coefficient indicates the two products are substitute goods; a negative
coefficient indicates they are complementary goods.
6.1. Exy = (% change sin quantity demanded of product X) / (% change in price of product Y)

6.2. Exy = 0 means that the product are independent