Elasticity and its types

The term "elasticity", which came to the economy of physics, is used to measure the relations of mutually variable price and quantity, or volume, sales of goods. The most convenient, unified unit of elasticity acts percent. Interest calculation can show the rate of change of any economic variable, no matter what were the original units - in money, in tons, meters, units, etc. In business practice, often use the percentage change in one variable resulting from a 1% change in the other. Measuring the price elasticity of demand is carried out to find out how much, interest has changed the volume of sales of goods, due to 1% change in the unit prices of these goods.

In practice, there may be at least 5 different price elasticity of demand:

1) demand is elastic, when a slight increase in sales price increases;

2) the demand has unit elasticity, when 1% change price is 1% change of sales of goods;

3) demand is inelastic, if very substantial reduction of price sales varies slightly;

4) demand is infinitely elastic, when you change only one price at which consumers buy goods;

5) demand is perfectly inelastic, when consumers purchase a fixed number of goods, regardless of its price.

All variants of the elasticity of demand can be shown in Figure 8.

Each option presented in Figure 8 has a coefficient of elasticity:

1) ratio is less than one inelastic demand;

2) the elasticity of demand when the 1% decrease in price causes an increase in sales of more than 1%, the coefficient of elasticity is greater than one;

3) the unit elasticity coefficient is a unit elasticity of supply.

P A inelastic demand

B