Elasticity

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  • A measure of responsiveness to changes in economic variables. It measures the effect of a percentage change in an economic variable on the percentage change of another economic variable. When the percentage change is measured over an arc, the elasticity coefficient is denoted as arc elasticity. If it is measured at a specific point, the elasticity coefficient is referred to as point elasticity.

    There are four main types of elasticity coefficients in economics: (1) elasticity of demand, (2) elasticity of supply, (3) income elasticity, and (4) cross-price elasticity. Elasticity of demand measures the responsiveness of consumers to a price change, using the formula %ÄQd/ %AP, where %ÄQd is percentage change in quantity demanded and %ÄP is percentage change in price. If the calculated elasticity coefficient is ...

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