What is Elasticity? What is Price Elasticity of Demand? Elasticity of Supply?

Elasticity is a measure of how responsive demand or supply is to changes in prices, incomes, or other factors.

Price elasticity of demand (PED) is a measure of the responsiveness of the quantity demanded of a good to a change in its price.

Price elasticity of supply (PES) measures how much the quantity supplied of a good responds to a change in its price.

For example, a product with a PED of 1.5 means that a 10% increase in price will cause a 15% decrease in demand.

On the other hand, a product with a PES of -2.0 means that a 10% increase in price will cause a 20% increase in supply.

Another example is that a product with a PED of 0.2 means that a 10% increase in price will cause a 2% decrease in demand.

Conversely, a product with a PES of -1.0 would mean that a 10% increase in price would cause a 10% increase in supply.

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