Elasticity refers to the rate of change of quantity demanded or supplied with respect to changes in factors like price. There are different types of elasticity including price elasticity of demand, which measures responsiveness of quantity demanded to price changes, and price elasticity of supply, which measures responsiveness of quantity supplied to price changes. Elasticity can take on different values that indicate the degree or characteristics of responsiveness, such as perfectly inelastic, inelastic, unitary, or perfectly elastic. Factors like availability of substitutes and time period can impact price elasticity.

2. Elasticity
is the rate of change of the
quantity demanded or
quantity supplied due to a
change in a variable.

3. Demand

4. Price Elasticity of Demand
measure of the
responsiveness of
the quantity
demand for a good
to a change in its
price.

5. Degree of elasticity Characteristic Value of
elasticity
Demand curve shape
Perfectly
inelastic
If the % of ∆ in Qd
is not sensitive to
the % of ∆ in price
Ed = 0 Vertical
Inelastic If the % of ∆ in Qd
is bigger than the
% of ∆ in price
0 < Ed < 1 Steep
Unitary elastic If the % of ∆ in Qd
is equivalent to
the % of ∆ in price
Ed = 1 Hyperbola
Elastic If the % of ∆ in Qd
is smaller than the
% of ∆ in price
1 < Ed <
∞
Tilted
Perfectly elastic If the % of ∆ in Qd
is infinity to the %
of ∆ in price
Ed = ∞ Horizontal

6. Relationship between Price Elasticity of
Demand & Total Revenue
Degree of Elasticity Characteristics Change in TR
Perfectly inelastic If P , the % change for Q is insensitive TR remains
If P , the % change for Q is insensitive TR
Inelastic If P , the % of for Q is smaller. TR
If P , the % of Q is smaller. TR
Unitary elastic If P , the % of for Q is similar TR remains
If P , the % of Q is similar.
Elastic If P , the % of for Q is more significant. TR
If P , the % of Q is more significant. TR
Perfectly elastic If P , the % of for Q is infinity. TR
If P , the % of Q is null. TR = 0

7. Factors Affecting Price Elasticity
of Demand
Availability of
Substitutes
Proportion of
Expenses from Income
Number of Uses Importance
Time Period Consumer Habit
Branding

8. Income Elasticity
Measures the
responsiveness or
sensitivity of
changes in the
quantity
demanded for a
product due to a
change in income

9. Relationship between the value of
income elasticity of demand and types
of goods
Value of income
elasticity of demand
(Ey)
Types of goods
Positive Normal goods
• Ey = 1 • Superior
• 0 < Ey < 1 • Essential
• 1 < Ey < ∞ • Luxuries
Negative Inferior goods
Zero (Ey = 0) Necessity goods

10. Cross Elasticity
Measures the
responsiveness or
sensitivity of
quantity
demanded for a
product due to a
change in the price
of a related
product

11. The relationship between two goods
from the value of cross elasticity of
demand
Value of cross
elasticity of
demand (Exy)
Relationship
between two goods
Negative Complementary
goods
Positive Substitute goods
Zero Non-related goods

12. Supply

13. Price Elasticity of Supply
Measures the
sensitivity or
responsiveness of
the quantity
supplied due to a
change in the price
of a product or
service.

14. Elasticity of
coefficient
Terms Explanation Diagrams
Ess > 1 Elastic A small
percentage
change in price
will lead to a large
percentage
change in the
quantity supplied
Ess < 1 Inelastic A large
percentage
change in price
will only affect a
small percentage
of the quantity
supplied
Ess = 1 Unitary elastic A percentage
change in price
equals the
percentage
change in the
quantity supplied
Ess = 0 Perfectly
inelastic
A percentage
change in price
has no effect on
the percentage
change in the
quantity supplied
Ess = ∞ Perfectly elastic An almost zero
percentage
change in price
brings about a
very large
percentage
change in the
quantity supplied

15. Factors Affecting the Price
Elasticity of Supply