Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 6, Problem 1DQ
To determine
Measurement of
Expert Solution & Answer
Explanation of Solution
Elasticity is the degree of responsiveness from the part of the consumer toward the changes in the price of a commodity in the economy. This means that when the price of a commodity increases, the consumers would decrease the quantity of the commodity and vice versa, which is the response from the consumer. The degree of this responsiveness from the consumer is measured with the elasticity measurement.
Elasticity is measured with the percentage change in the quantity demanded divided with the percentage change in the price in the economy. The calculation is made in percentage terms in order to bring uniformity between the price and the quantities. This is because the price and quantity will be measured in separate measures and cannot be directly used to calculate elasticity. When the percentage term is used to measure elasticity, the units of measurement do not matter the elasticity measurement. It is the reason behind the use of the percentages while calculating elasticity.
Economics Concept Introduction
Elasticity: Elasticity is the degree of responsiveness from the part of the consumer toward the changes in the price level in the economy.
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