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Summary Elasticity calculations
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A summary on how to calculate elasticity, covering: Price elasticity of demand, price elasticity of supply, marginal revenue and price elasticity of demand, logarithmic scales and elasticities.

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  • No
  • Chapter 9, 13
  • June 17, 2022
  • 18
  • 2021/2022
  • Summary

Subjects

  • price elasticity of supply
  • price elasticity of demand
  • marginal revenue and price elasticity of demand

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EECM 3714
Lecture 6: Unit 6
Elasticity
Renshaw, Ch. 9, 13

22 March 2022

,OUTLINE

The elasticity defined
1. Price elasticity of supply
• Example
2. Price elasticity of demand
• Example
3. Relationship between MR and price elasticity of demand
4. Other elasticities
5. Logarithmic scales and elasticities
• Example

, ABSOLUTE, PROPORTIONATE AND PERCENTAGE CHANGES

• In economics we are more concerned with proportionate or percentage changes in a
variable than with absolute changes in that variable.
• Absolute change: Δy (measured in units of y, such as litres).
• Absolute change Δy is current level 𝑦1 minus initial level 𝑦0
Δ𝑦 1
• Proportionate change: (pure number, such as ).
𝑦0 10

• This expresses the absolute change Δy as a proportion of the initial level 𝑦0
Δ𝑦
• Percentage change : × 100 (in per cent, such as 10%)
𝑦0

• Multiply the proportionate change by 100.
• Proportionate and percentage change are so similar that they are almost interchangeab

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