Explain the five degree of price elasticity of supply with schedule and diagram
Answers
Answer:
Explanation:
Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price. It is computed as the percentage change in quantity demanded—or supplied—divided by the percentage change in price.
Elasticity can be described as elastic—or very responsive—unit elastic, or inelastic—not very responsive.
Elastic demand or supply curves indicate that the quantity demanded or supplied responds to price changes in a greater than proportional manner.
An inelastic demand or supply curve is one where a given percentage change in price will cause a smaller percentage change in quantity demanded or supplied.
Unitary elasticity means that a given percentage change in price leads to an equal percentage change in quantity demanded or supplied.
What is price elasticity?
Both demand and supply curves show the relationship between price and the number of units demanded or supplied. Price elasticity is the ratio between the percentage change in the quantity demanded, \text{Q}_dQ
d
start text, Q, end text, start subscript, d, end subscript, or supplied, \text{Q}_sQ
s
start text, Q, end text, start subscript, s, end subscript, and the corresponding percent change in price.
The price elasticity of demand is the percentage change in the quantity demanded of a good or service divided by the percentage change in the price. The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.
Elasticities can be usefully divided into five broad categories: perfectly elastic, elastic, perfectly inelastic, inelastic, and unitary. An elastic demand or elastic supply is one in which the elasticity is greater than one, indicating a high responsiveness to changes in price. An inelastic demand or inelastic supply is one in which elasticity is less than one, indicating low responsiveness to price changes. Unitary elasticities indicate proportional responsiveness of either demand or supply.
Perfectly elastic and perfectly inelastic refer to the two extremes of elasticity. Perfectly elastic means the response to price is complete and infinite: a change in price results in the quantity falling to zero. Perfectly inelastic means that there is no change in quantity at all when price changes.
If . . . It Is Called . . .
\dfrac{\mathrm{\% ~ change~ in~ quantity}}{\mathrm{\% ~ change~ in~ price}}=\infty
% change in price
% change in quantity
=∞start fraction, percent, space, c, h, a, n, g, e, space, i, n, space, q, u, a, n, t, i, t, y, divided by, percent, space, c, h, a, n, g, e, space, i, n, space, p, r, i, c, e, end fraction, equals, infinity Perfectly elasti
\dfrac{\mathrm{\% ~ change~ in~ quantity}}{\mathrm{\% ~ change~ in~ price}}>1
% change in price
% change in quantity
>1start fraction, percent, space, c, h, a, n, g, e, space, i, n, space, q, u, a, n, t, i, t, y, divided by, percent, space, c, h, a, n, g, e, space, i, n, space, p, r, i, c, e, end fraction, is greater than, 1 Elastic
\dfrac{\mathrm{\% ~ change~ in~ quantity}}{\mathrm{\% ~ change~ in~ price}}=1
% change in price
% change in quantity
=1start fraction, percent, space, c, h, a, n, g, e, space, i, n, space, q, u, a, n, t, i, t, y, divided by, percent, space, c, h, a, n, g, e, space, i, n, space, p, r, i, c, e, end fraction, equals, 1 Unitary
\dfrac{\mathrm{\% ~ change~ in~ quantity}}{\mathrm{\% ~ change~ in~ price}}<1
% change in price
% change in quantity
<1start fraction, percent, space, c, h, a, n, g, e, space, i, n, space, q, u, a, n, t, i, t, y, divided by, percent, space, c, h, a, n, g, e, space, i, n, space, p, r, i, c, e, end fraction, is less than, 1 Inelastic
\dfrac{\mathrm{\% ~ change~ in~ quantity}}{\mathrm{\% ~ change~ in~ price}}=0
% change in price
% change in quantity
=0start fraction, percent, space, c, h, a, n, g, e, space, i, n, space, q, u, a, n, t, i, t, y, divided by, percent, space, c, h, a, n, g, e, space, i, n, space, p, r, i, c, e, end fraction, equals, 0 Perfectly inelastic