2I Elasticity

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Department
Economics
Course
ECO100Y1
Professor
Gustavo Indart
Semester
Summer

Description
ELASTICITY  Elasticity is the measure of responsiveness of one thing to another  Price Elasticity of Demand is the measure of responsiveness of price to a change in quantity. PED= %Change in Quantity %Change in Price  Price Elasticity of Supply is the measure of responsiveness of price to a change in Supply. PED= %Change in Supply %Change in Price  Income Elasticity of Demand is the measure of responsiveness of Income to a change in quantity. PED= %Change in Quantity %Change in Income . Elasticity Absolute Value Elastic >1 Inelastic <1 Unitary Elastic 1 Perfectly Elastic Infinity Perfectly Inelastic 0  Greater PED and lesser PES mean a greater burden of tax on producer.  Greater PES and lesser PED mean a greater burden of tax on consumer. (Note: the same applies to subsidy  The sum of consumer surplus and producer surplus is the total surplus. A decrease in total surplus due to taxes is referred to as welfare loss. PED= Perfectly inelastic or PED=0 DD Price DD PED= Perfectly Elastic or Inifite PED PES= Perfectly inelastic or PES=0 SS Price
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