Elasticity The coefficient of elasticity is a measure of the responsiveness of a dependent variable to a change in an independent variable.

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Presentation transcript:

Elasticity The coefficient of elasticity is a measure of the responsiveness of a dependent variable to a change in an independent variable.

Most Widely Used Elasticities n Price-Elasticity of Demand; n Price-Elasticity of Supply; n Cross-Elasticity of Demand; and n Income-Elasticity of Demand

Price-Elasticity of: n Demand ( E P ) is a measure of responsiveness of quantity demanded to changes in price. n Supply ( E S ) is a measure of responsiveness of quantity supplied to changes in price.

( Determinants of Price-Elasticity of Demand ( E P ): n Necessity or Luxury; n Availability of Close Substitutes; n Share of Budget Absorbed; and n Length of Time Considered.

Elasticity and Total Expenditure