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en:types-of-elasticity

Types of Elasticity

The elasticity is the relative change of the value of a function in relation to the relative change on the value of an input.

In economics, supply and demand functions have several inputs: the price of the good, the price of other goods and the income.

When we calculate the elasticity of demand taking the price of the good that we are analyzing into account, we are calculating the Price Elasticity of the Demand.

When we take the price of other goods into account, we are calculating the cross elasticity of demand.

When we measure the change in the demand of a good, when the income changes, we calculate the income elasticity of demand.

The value of the elasticity can be:

  • Less than -1 (-∞ < e < -1) : we say that this part of the demand is relatively elastic.
  • Between -1 and 0 (-1 < e < 0): inelastic.
  • -∞ : perfect elastic.
  • 0 : perfect inelastic.
  • -1 : unit elastic. This point of the demand function has an unitary elasticity.

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en/types-of-elasticity.txt · Last modified: 2015/08/06 15:48 by federico