Economics

• Price elasticity


  A measure of how consumers react to the prices of products and services
• Types of price elasticities

  • Price elasticity of demand
  • Price elasticity of supply
• Price elasticity of demand (PED or Ed)


  A measure in economics to show how demand responds to a change in the price of a product or service
• Price elasticity of supply (PES or Es)


  A measure that shows how the quantity of supply is affected by a change in the price of a good or service
• Price Elasticity of Demand (PED)


  The measurement of the change in quantity demanded as a result of the change in the price of the product or service
• Elastic demand


  Demand is very sensitive to a change in price of a product
• Inelastic demand


  Demand is not sensitive to a change in price of a product
• PED calculation example


  • Old Price: $9, Old Quantity: 150, New Price: $10, New Quantity: 110

  PED = (110-150)/150 = -40/150 = -0.267 = -2.67
• The demand curve is normally downward sloping, so the price elasticity of demand is usually a negative number
• PED > 1


  Demand is elastic
• PED = 1


  Demand is unit elastic
• PED < 1


  Demand is inelastic
• PED = 0


  Demand is perfectly inelastic
• PED = ∞


  Demand is perfectly elastic
• Factors affecting price elasticity of demand

  • Availability of substitutes
  • Luxuries and necessities
  • Portion of income spent on the item
  • Adjustment time
  • Habit forming goods
• Economy 


  is an district region where economic activity takes place
• Economics 


  is a science that studies people's behavior and choices
• Opportunity Cost 


  is refer to the next best alternative forgone
• Scarcity 


  is where human have unlimited wants but live in an world with limited resources
• A Good is anything that we can feel, see, touch and taste
• Terms of Trade

  a ratio between a country's export prices and it's import prices
• Balance of Trade 


  the difference between the value of a country exports and imports