Question

Explain the term “elasticity” in economics. Show several examples and demonstrate how these elasticities are derived.

Answer 1

Elasticity is an economics concept that estimates the responsiveness of one variable to changes in another variable. Assume you drop two things from a second-floor overhang. The principal thing is a tennis ball, and the second thing is a block. Which will bounce higher? Clearly, the tennis ball. We would state that the tennis ball has more prominent elasticity. Both the demand and supply bend demonstrate the connection among cost and quantity, and elasticity can improve our comprehension of this relationship.

The own price elasticity of demand is the rate change in the amount requested of a good or service divided by the percentage change in the cost. This demonstrates the responsiveness of the quantity demanded to an adjustment in cost. The own price elasticity of supply is the rate change in quantity supplied divided by the percentage change in cost. This demonstrates the responsiveness of quantity provided to an adjustment in cost.

The formula for elasticity, can be utilized for most flexibility issues, we simply utilize distinctive costs and amounts for various circumstances. The formula is given as % change in quantity divided by % change in prices.