Elasticity of Demand & Supply Notes PDF

# Elasticity of Demand & Supply **Nama**: Kadek Nindya Angelika **Nim**: 2407531098 **NO**: 05 ## Why we called it elastic??? When prices go down, people usually buy more. This is the basic law in demand, but how much people buy depends on the elasticity of demand? The things: * **Elastic dem...

# Elasticity of Demand & Supply **Nama**: Kadek Nindya Angelika **Nim**: 2407531098 **NO**: 05 ## Why we called it elastic??? When prices go down, people usually buy more. This is the basic law in demand, but how much people buy depends on the elasticity of demand? The things: * **Elastic demand**: A small price > big change in how much people buy * **Inelastic demand**: A big price > small in how people bay. ## The coefficient of elasticity demand: * The coefficient of elasticity demand is the value of the comparison between the percentage change in the amount of demand and the percentage change in price, but in analysis, the coefficient of elasticity demand is more often expressed as the price elasticity of demand (PED). * **Formula of the coefficient elasticity demand**: * $Ed = \frac{Percentage\ change\ in\ Quantity\ demanded}{Percentage\ change\ in\ price}$ * $​Ed = \frac{\%\Delta Q}{\%\Delta P}$ ### How if we gonna change $(P \gt P1)$ and $(Q \gt Q1)$: * $Ed = \frac{\Delta Q}{Q} * \frac{P}{\Delta P}$ * **Mid point formula** Mid point value of the price and quantity demanded in calculating the percentage change in price and the percentage change in quantity demanded * $Ed = \frac{Q1-Q}{(Q+Q1)/2} * \frac{(P+P1)/2}{P1-P}$ * **Elasticity along a linear demand curver** The price elasticity of demand is calculated using the demand schedule in the table 4 mid point method, a linear demand curve, which plots the relationship between price of quantity demanded, is straight line, but the elasticity along this line is not constant. * **Vertical intercept**: Where the quantity demanded is zero. * **Horizontal intercept**: Approaching zero price, the curve suggests a maximum quantity demanded. ## Demand elasticity Demand elasticity is a concept that measures sensitivity in the economic field, factors that affect demand elasticity include time factors, availability of substitute goods, and basic needs. * Perfectly Elastic $E_d = -∞$ $\frac{\Delta Q}{\Delta P}$ ## Elasticity demand curve ### Inelastic demand curve * $E_d \lt 1$ * Inelastic curve mean that when the price under go a change, they don’t really responsif, because when the price is changing, the society and the demand is still high. ### Elastic demand curve * $E_d \gt 1$ * Elastic curve mean when the price changed slightly then the amount of quantity demand will drastically changed. Specifically, when the price increase stop and the demand descending past the percentage of the price, it will called by elastic. ### Unitary demand curve * $E_d =1$ * Unitary curve mean when the price increase 5% the quantity demand increasing 5%. ### Perfect Inelastic demand curve * $E_d = 0$ * Perfect inelastis mean, whatever the price of the item, the demand will be the same. ### Perfect Elastis demand curve * $E_d = ∞$ * Perfect elasticity mean, whatever the amount of demand, the price will be the same. ## Calculating the coefficient of supply elasticity. $E_s = \frac{\Delta Q}{Q} * \frac{P}{\Delta P}$