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CHAPTER 5 Elasticity - Sacramento State

CHAPTER 5 Elasticity2 What you will learn in this CHAPTER :Definition of Elasticity price Elasticity of demand income Elasticity of demand and price Elasticity of supplyFactors that influence the size of elasticitiesHow Elasticity affects the incidence of a tax, and who bears its burden?3 Defining and Measuring ElasticityThe price Elasticity of demand is the ratio of the percent change in the quantity demanded to the percent change in the price as we move along the demand World demand for Oil5 Using the Midpoint Methodto Calculate Elasticities6 Some Estimated Price Elasticities of DemandGoodPrice elasticityInelastic demandEggs demandHousi

Demand Good Price elasticity Inelastic demand Eggs 0.1 Beef 0.4 Stationery 0.5 Gasoline 0.5 Elastic demand Housing 1.2 Restaurant meals 2.3 Airline travel 2.4 Foreign travel 4.1 Price elasticity of demand < 1 Price elasticity of demand > 1

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