Economic

Essay

  1. Point Elasticity of Price demand

PointElasticity of Price of demand takes the elasticity of a particularspot on a curve or at times between the points. It is given by:

PED=

%Δ Q / Q

————-

%Δ P / P

%Δ Q/Q= 5/50*100

%Δ P/P = 13/70*100

ThereforePED= 10/-18.571429

PED=-0.53846

  1. Arc Price Elasticity of demand

Thisis a measure of elasticity between any to specific points or spots ona curve.

Mid-pointof 70 and 63 is 66.5

%Δ in quantity= 13/66.5= 0.19548872

%Δ in price= 5/52.5= -0.0952381

ThereforePED = 0.19548872/-.0952381

ArcPrice Elasticity of demand = -2.0526

  1. Arc price elasticity of supply

%Δ in quantity= 30/55=0.5454

%Δ in price =10/45=0.2222

ThereforePES= 0.5454/0.2222

Arcprice elasticity of supply= 2.4545

  1. Income Elasticity of Demand

Itmeasures the degree of change of demand of a good or service as aresult of changes in income.

YED=%change in Q.D&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp% change in Income

%change in QD= (3/12)* 100 = 25%

%change in Income= (10,000/25,000)*100 =25%

YED=1

Inthis case, there is there is unitary income elasticity of demandgiven that an increase in income is results in the same proportionateincrease in the quantity of goods demanded.

  1. Cross Elasticity

(12+15/25+20)*5/3= (27/45)*5/3= 0.6*1.6667=1

Theyare substitute goods because price elasticity is positive as we get(1) from the calculations.