Elasticity

# Elasticity - Elasticity Elasticity is a tool that is used...

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EC202 Principles of Microeconomics Elasticity page 1 Elasticity Elasticity is a tool that is used to describe the relationship between two variables. It is defined as the percentage change in a dependent variable ±caused² by a percentage change in an independent variable. variable t independen an in % variable dependent a in % Elasticity ± ± ² While elasticity can be calculated and used for any two related variables there are four basic coefficients of elasticity used in principles of economics ±² ± Own± price elasticity of demand This is a measure of the percentage change in the quantity demanded ±caused² by a percentage change in price. Because the demand function is an inverse relationship between price and quantity the coefficient of price elasticity will always be negative: price in change Demanded Quantity in change demand of elasticity ice % % Pr ± ±² Income elasticity . It is used to describe how a change in buyers³ income shifts the demand function for a good Income in change

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## This note was uploaded on 11/07/2011 for the course ECON 101 taught by Professor Johnson during the Spring '11 term at Sciences Po.

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Elasticity - Elasticity Elasticity is a tool that is used...

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