Elasticity

Elasticities are measures of the responsiveness of a variable to changes in price or any of the variable’s determinants. Used in microeconomics.

Price elasticity of demand (PED)

Measures responsiveness of the quantity demanded of a good to changes in its price; we take the absolute value of the formula.

$$PED=\frac{\%\Delta Q_d}{\%\Delta P}$$

Cross-price elasticity of demand (XED)

Measures responsiveness of demand for one good to a change in the price of another good.

$$XED=\frac{\%\Delta Q_x}{\%\Delta P_y}$$

Income elasticity of demand (YED)

Measures the responsiveness of demand to changes in income.

$$YED=\frac{\%\Delta Q_d}{\%\Delta Y}$$

Price elasticity of supply (PES)

Measures the responsiveness of the quantity of a good supplied to changes in its price.

$$PES=\frac{\%\Delta Q_s}{\%\Delta P}$$