Question

In words and mathematics, explain the concept of elasticity. What is the purpose of an elasticity? Give an example where an elasticity is preferred to simple comparative statics (∆Y /∆X).

Answer 1

ssmate Concept of Elasticity Date Page • When a variable y responds to change in varmable x, variable y is said to be Elastic. Thus, to another. Elasticity refers to the responsiveness of one variable of PURPOSE like for example Price Elasticity of demand measures the responsiveness demand to change in price of a commodity. • Thus, Elasticity is useful concept for of producers, farmers, workers, government and in International trade. Elaskity is preferred to many comparative statistics mean, needian because it is unitless and is easy to compare for example: A monopolis adopes a pice discriminatory policy only when elasticity of demand from different consumers is different. By comparing elasticities take one can conclude that higher Inelastic demand of price is an ea charged in case than those with more elastic demand. Scanned by TapScanner