Question

What is elasticity? What is price elasticity of demand? What is price elasticity of supply?

Answer 1

Elasticity

If we talk about economics

Elasticity measures how much a change in one economic variable can change another variable.

So basically elasticity not only tells about change but also tells about its magnitude.

Elasticity of Demand

The law of demand tells about the inverse relationship between price and quantity demanded.

So it can be said that the law of demand tells the direction of change in the quantity demanded as a result of a change in price, but it does not specify the magnitude, amount, or the extent by which the quantity demanded changes with a change in price.

The concept of elasticity of demand helps to measure the magnitude of change in the quantity demanded.

It is calculated as

Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price

Elasticity of Supply

The law of supply tells about the positive relationship between price and quantity supply.

This works same as the elasticity of demand as it tells about the magnitude, amount, or the extent by which the quantity supplied changes with a change in price.

It is calculated as

Price Elasticity of Supply = % Change in Quantity Supplied / % Change in Price