webelieve04: What exactly does elasticity in economics mean?
I keep having to do questions on elasticity and inelasticity for my economics class (such as demand elasticity) and I can’t quite understand what it means.
Answers and Views:
Answer by zor_sv
Exy – the % that y will change when x modifies
Exy = y1-y0/y0 / x1-x0/x0
1 – current or future time
0 – past or current
Demand elasticity refers to the amount of change in demand as price changes. For example thing oil. Regardless of how much you change the price people will generally still buy this (within reason of course) thus this is inelastic. A good example of a elastic good would be tea. The more it goes up in price the less likely people will be to buy it because the can substitute out (they could by coffee, or beer). You can’t really substitute out of oil.
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