Elasticity Measurement Tool
Often we as high school students go through the confusion while trying to understand the chapter elasticity. Some of the questions that come in our mind are as follows; 1) Can the value of the elasticity be negative? 2) What about the notion more elastic or less elastic or less inelastic or more inelastic? In order to address the issue I have come up with some solutions that may help you (students) to overcome the ambiguity in understanding the chapter elasticity.
In order to answer the questions, let me first give you a little background about what we are talking.
The term Elasticity in economics is used as a replacement of the word Responsiveness. The responsiveness of the buyers to a change in price of a good / buyers to a change in price of a substitute good / buyers to a change in income / sellers to a change in price is measured through the elasticity. As from the brief information you can see there are four types of elasticities such as price elasticity of demand, cross elasticity of demand, income elasticity of demand and price elasticity of supply.
Elasticity Measurement Tool
In all the cases, elasticity tries to give us the proportionate change in demand (quantity demanded) against the proportionate change in price of a good/price of other good/ income. This means, the outcome elasticity produces will have two significance; 1) relationship 2) value. For example, 20% increase in quantity is led by 10% decrease in price. Here in this case price elasticity of demand would be +20%/-10% = -2. This outcome -2 has got two components first is "-" and the second one is "2". The result -2 does not reckon the value as -2 (which seems like less than 1) rather it represents the absolute value 2 which is greater than 1. Whereas, the "-" sign represents the relationship between the price and quantity. So we got the answer of the first question "Can the value of the elasticity be negative?" and the answer is never. The value of the elasticity will always be in absolute but not a negative value.
The point of discussion in this article is about the value. The elasticity outcome value can be five types; 1) perfectly elastic which is infinite 2) elastic which is greater than 1 3) unit elastic which is equal to 1 4) inelastic which is less than 1 5) perfectly inelastic which is equal to "0" (zero).
Elasticity Measurement Tool
Here comes the answer of the second question which is about "more or less elastic or more or less inelastic". Please, check the table below for more or less elastic.
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| Elasticity Measurement Tool - elastic |
Please, check the table below for more or less inelastic.
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| Elasticity Measurement Tool - inelastic |
I hope this could help you to understand the elasticity better. Wish you a good luck.
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