elasticity of demand - MARKETS
Unit 3: Elasticity About this unit Why are resold concert tickets so expensive? Why is holiday candy so cheap in January? Learn how supply and demand changes can influences how much things cost, and why the prices of some items can change so dramatically.
Understanding the Context
Learn about the price elasticity of demand, a concept measuring how sensitive quantity is to price changes. Elasticity is calculated as percent change in quantity divided by percent change in price. Elastic situations have elasticity greater than 1, while inelastic situations have elasticity less than 1. Elasticity varies along a demand curve, and different calculation methods exist.
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What we're going to think about in this video is elasticity of demand-- tis-sit-tity, elasticity of demand. And what this is, is a measure of how does the quantity demanded change given a change in price? Or how does a change in price impact the quantity demanded? So change in price-- impact quantity-- want to be careful here-- quantity demanded. When you talk about demand, you're talking ...
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Elasticity applies in labor markets and financial capital markets just as it does in markets for goods and services. Cross-price elasticity of demand is the percentage change in the quantity of good A that is demanded as a result of a percentage change in the price of good B. Since elasticity of demand and elasticity of supply have the same formula, if for a particular product we wish to calculate both, how do we differentiate between the two expressions? The coefficient of elasticity measures how responsive the quantity demanded of a good is to a change in price. If the coefficient is greater than 1, the good is elastic, meaning quantity changes significantly with price changes; if it is less than 1, the good is inelastic, meaning quantity is less responsive to price changes. If the coefficient is equal to 1, the good is unitary elastic ...
Elasticity and tax incidence Typically, the incidence, or burden, of a tax falls both on the consumers and producers of the taxed good. But if we want to predict which group will bear most of the burden, all we need to do is examine the elasticity of demand and supply. Long-term and short-term supply elasticity On the supply side of markets, producers of goods and services typically find it easier to expand production in the long run of several years rather than in the short run of a few months.