Our normal laws of demand suggest that as prices increase demand decreases
whilst firms attempt to supply more (with the opposite happening as prices
decrease). The concept of elasticity extends this understanding by asking the
question ‘by how much does demand and supply change?’
What do I need to know?
1 The definitions of each elasticity
2 Each elasticity formula and confidence in using them and making
calculations
3 How to draw the diagrams for curves with different price elasticity
4 The determinants of price elasticity of demand (PED) and price elasticity
of supply (PES)
5 Examples of how elasticity can influence the scale of changes in demand and
supply and prices
6 Why elasticity is important for businesses and when the government
intervenes in markets
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