In: Economics
What does an elasticity of > 1 or < 1 imply both with elasticity of demand or supply?
Elasticity = (% change in quantity / % change in price)
If the elasticity is greater than or equal to 1, the curve is
considered to be high elastic. If it is less than one, the curve is
said to be less elastic.
Elasticity of demand (also called price elasticity of demand). The price elasticity of demand quantifies the effect of a change in its own price on the quantity demanded.
Formally, it is defined as the ratio of Percentage Change in Quantity Demanded to a Percentage Change in its own Price.
Elasticity of demand (ed) = %Change in Quantity Demaded/ %Change in Price.
Implication of ed > 1
Implication of ed<1
Elasticity of Supply (also called Price Elasticity of Supply).
The Price Elasticity of Supply quantifies the effect of a change in its own price on the quantity supplied.
Formally it is defined as the ratio of the Percentage Change in Quantity Supplied to a Percentage Change in Price.
Elasticity of Supply (es) = %Change in Quantity Supplied / %Change in Price.
Implication of es >1
Implication of es<1