Can anyone please explain elasticity and the formula to find it?
Posted Thursday, March 4, 2010 by admin
This is the strangest econ class I have ever had, the prof refuses to include math in the class and yet the book is nothing but math and definitions (with examples of course). Well, our session today covered elasticity and for homework we were given a chart to fill in the blanks.
The examples in class were:
product: insulin
change in price: +10%
change in quantity: 0
elasticity= 0 Perfect elasticity
product: Basic telephone service
change in price: +10%
change in quantity: -1%
elasticity= -.1 inelastic
product: Beef
change in price: +10%
change in quantity: -10%
elasticity= -1 Unit elastic
product: bananas
change in price: +10%
change in quantity: -30%
elasticity= -3 elastic
well, now the homework is like:
1. change in price is +10% change in quantity is -12% what is the elasticity
2. change in price is -20% elasticity is -.5 what is the change in quantity
But th ebook uses the terms income elasticity and cross-price elasticity of demand with factors of EsubD and EsubS and another formula for when demand shifts.
I am so confused by the difference between book and professor that it isn’t funny. He says that you only need math for higher levels of economics and then you use calculus more often than not. He is only concerned with bond markets since that is what he wants to go into. Is it normal to have an econ class with math and the terms used in the book? If I wanted to continue with economics wouldn’t I need the commonly used terms and formulas?




General elasticity formula for your case is:
Elasticity = ΔQ% / ΔP%
or
E = ΔQ% / ΔP%
1. change in price is +10% change in quantity is -12% what is the elasticity
Answer: Elasticity = ΔQ% / ΔP% = -12/10 = 1.2 (Elastic)
2. change in price is -20% elasticity is -.5 what is the change in quantity
Answer :
-0.5 = ΔQ% / -20
ΔQ% = -0.5 * -20 = + 10%