Download Referring to the four elasticity concepts and their respective

Referring to the four elasticity concepts
and their respective meanings,
distinguish between those elasticities that involve movements along a demand
or supply curve, and those that involve shifts of the curve(s).
The elasticities that will cause a movement along the demand of supply curve are…
YED is a measure of the responsiveness of quantity demanded of a good to a change
in the income of the consumer. When YED is negative they are inferior goods.
A movement along the demand and supply curve is caused by changes in price. Nonprice determinants of demand and supply cause a shift of the curve. It is calculated
with the formula PED = %ΔQD / %ΔP. When PED is greater than 1 it is elastic. When
PED is less than 1 it is considered inelastic. When PED is zero the Qd remains
constant.
PES is a measure of responsiveness of the quantity supplied to changes in its price. It
is calculated with the formula PES = %ΔQS / %ΔP. It is calculated with the formula
YED = %ΔQD / %ΔY. When YED is positive they are normal goods, inelastic normal
goods are greater than zero but less than 1 and elastic normal goods are greater
than 1.
PED is a measure of responsiveness of the quantity demanded to changes in its
price. When PES = 1, unit elastic supply occurs and when PES = 0 it is perfectly
inelastic. Therefor when PES is greater than zero but less than 1 it is inelastic and
greater than 1 elastic.
The elasticites that will cause a shift of the demand curve are…
The four elasticities are price elasticity of demand (PED), price elasticity of supply
(PES), income elasticity (YED), and cross elasticity (XED).
XED is a measure of the responsiveness of quantity demanded of a good to a change
in the price of another good. Substitute goods have a positive XED, while
complementary goods have a negative XED. Unrelated goods have a XED = zero.
Elasticity is measure of responsiveness to changes in price, income and the
substitution effect.