Significance Of Price Elasticity Of Demand And Of Supply In Determining The Extent Of These Changes
Economics notes
Significance Of Price Elasticity Of Demand And Of Supply In Determining The Extent Of These Changes
➡️ Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It is an important factor in determining the extent of changes in price and quantity.
➡️ Price elasticity of supply measures the responsiveness of quantity supplied to a change in price. It is also an important factor in determining the extent of changes in price and quantity.
➡️ If demand is price inelastic, a change in price will result in a larger change in quantity demanded than in price.
➡️ If supply is price inelastic, a change in price will result in a larger change in quantity supplied than in price.
➡️ If demand and supply are both price elastic, a change in price will result in a smaller change in quantity demanded and supplied than in price.
What is the significance of price elasticity of demand and supply?
Price elasticity of demand and supply is an important economic concept that measures the responsiveness of demand and supply to changes in price. It is used to determine the extent to which changes in price will affect the quantity of a good or service that is demanded or supplied. This helps economists to understand how changes in price will affect the market equilibrium and the overall economic environment.
How is price elasticity of demand and supply calculated?
Price elasticity of demand and supply is calculated by dividing the percentage change in quantity demanded or supplied by the percentage change in price. This calculation helps economists to determine the degree of responsiveness of demand and supply to changes in price.
What are the implications of price elasticity of demand and supply?
The implications of price elasticity of demand and supply are important for understanding how changes in price will affect the market equilibrium and the overall economic environment. If demand or supply is price elastic, then a small change in price will result in a large change in quantity demanded or supplied. On the other hand, if demand or supply is price inelastic, then a large change in price will result in a small change in quantity demanded or supplied.