Economics Consumer Surplus And Producer Surplus Questions
Price elasticity of demand is a measure of the responsiveness of the quantity demanded of a good or service to a change in its price. It indicates how sensitive consumers are to changes in price. If the demand for a good is elastic, a small change in price will result in a relatively large change in quantity demanded. On the other hand, if the demand is inelastic, a change in price will have a relatively small impact on quantity demanded.
Price elasticity of supply, on the other hand, measures the responsiveness of the quantity supplied of a good or service to a change in its price. It indicates how sensitive producers are to changes in price. If the supply of a good is elastic, a small change in price will result in a relatively large change in quantity supplied. Conversely, if the supply is inelastic, a change in price will have a relatively small impact on quantity supplied.
Both price elasticity of demand and supply are important concepts in economics as they help determine the extent to which changes in price affect the behavior of consumers and producers, and ultimately impact market equilibrium and efficiency.