calculating elasticity

definition: Use the elasticity formula to determine the elasticity of supply, as it is a concern only from the producer's side

- equal to 1 or ( = 1 ) is no change
- greater than 1 or ( > 1 ) is a big change
- less than 1 or ( < 1 ) is a small change

connected key terms: elasticity of supply | elastic | inelastic | unitary

everyday examples

California residents have seen the price of gas rise 60 cents from three weeks ago when it was $4.13. OPEC has since raised their quantity supply from 12 billion gallons of gas to 17 billion gallons. What is the elasticity of supply, and determine whether the product is elastic, inelastic or unitary?
QS 12-17/12 = 5/12 = 0.4166 x 100 = 41.66
P 4.13-4.73/4.13=0.60/4.13 = 14.52
QS/P or E 41.66/14.52 = 2.86 elastic

navigation

Chapter 1 ▪ unit 1 ▪️ unit 2 ▪ unit 3 ▪ home