PAMANTASAN NG LUNGSOD NG MAYNILA

University of the City of Manila

General Luna St, Intramuros, Manila, 1002 Metro Manila
School Year: 2019-2020

Basic Microeconomics:

“ELASTICITY”

(Print-out Assignment)

Submitted by:

MASANGYA, Genre G.

BSBA OM 1-1

Submitted to:

Dr. Sonya Manlangit, PhD

Basic Microeconomics Professor

August 27, 2010

  What is ELASTICITY?
Elasticity is the degree to which a demand or supply curve reacts to a change in the price and
other determinants. Elasticity varies among products because some products may be essential to
the consumer. Products that are necessities are more insensitive to price changes because
consumer would continue buying these products despite price increases. Conversely, a price
increase of a good or service that is considered less of a necessity will deter more consumers
because the opportunity cost of buying the product will become too high.
A good or service is considered to be highly elastic if a slight change in price leads to a sharp
change in the quantity demanded ir supplied. Usually these kinds of products are readily
available in the market and a person may not necessarily need them in his or her daily life. On
the other hand, an inelastic good or service is one in order which changes in price is greater than
changes in the quantity demanded or supplied, if any at all. These goods tend to be things that are
more of a necessity to the consumer in his or her daily life. To determine the elasticity of the
supply or demand curves, we can use this simple equation.
Elasticity is a central concept in economics, and is applied in many situations. Basic demand
and supply analysis tells us that economic variables, like price, income and demand, are causally
related. Elasticity can provide important information about the strength or weakness of such
relationships. Elasticity refers to the responsiveness of one economic variable, such as quantity
demanded, to a change in another variable, such as price.

 KINDS OF ELASTICITY?
 Price elasticity of demand (PED), which measures the responsiveness of the quantity
demanded to a change in price. PED can be mmeasured over a price range, called arc
elasticity, or at one point, called point elasticity.
 Price elasticity of supply (PES), which measures the responsiveness of the quantity
supplied to a change in price.
 Cross elasticity of demand (XED), which measures the responsiveness of the quantity
demanded of one good, good X, to a change in the price of another good, good Y.
 Income elasticity of demand (YED), which measures the responsiveness of the quantity
demanded to a change in consumer incomes.
  FORMULA OF ELASTICITY?
Price elasticity of demand
Price elasticity of demand (PED) shows the relationship between price and quantity demanded
and provides a precise calculation of the effect of a change in price on quantity demanded.

Price elasticity of supply

Price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in
price. It is necessary for a firm to know how quickly, and effectively, it can respond to changing
market conditions, especially to price changes. The following equation can be used to calculate
PES.

Cross elasticity of demand

Cross elasticity of demand (XED) is the responsiveness of demand for one product to a change in
the price of another product. Many products are related, and XED indicates just how they are
related. The following equation enables XED to be calculated.

Income elasticity of demand

Income elasticity of demand (YED) shows the effect of a change in income on quantity
demanded.