ECON101 Lecture : LEC. 11 - Elasticity of Demand (4)

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Jo Harvie

Document Summary

Cross elasticity of demand (exy) measures the responsiveness of quantity demanded for a commodity to a change in the price of a second commodity. Exy = % change in quantity demanded x % change in the price of y. Formula: exy = qx1 - qx2 x py1 + py2 py1 - py2 qx1 + qx2. Example 1: (in notes) exy = +1 positive: Price elasticity of supply (es) measures the responsiveness of quantity supply for a commodity to a change in the price of a commodity ** by how much is it going to incline/decline. Es = % change in the quantity supplied % change in price. Price elasticity of supply is more inelastic in situations where the required factors of production are scarce. Price of commodity goes up, firm will want to expand their production. But they cant because factors of production (cant get the resources needed)