Economics Elasticity Of Demand Questions Medium
The difference between elasticity of demand and elasticity of supply lies in the perspective from which they are analyzed. Elasticity of demand measures the responsiveness of quantity demanded to changes in price, while elasticity of supply measures the responsiveness of quantity supplied to changes in price.
Elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price. It indicates how sensitive consumers are to changes in price. If the elasticity of demand is greater than 1, demand is considered elastic, meaning that a small change in price leads to a relatively larger change in quantity demanded. On the other hand, if the elasticity of demand is less than 1, demand is considered inelastic, indicating that changes in price have a relatively smaller impact on quantity demanded.
Elasticity of supply, on the other hand, is calculated by dividing the percentage change in quantity supplied by the percentage change in price. It measures the sensitivity of producers to changes in price. If the elasticity of supply is greater than 1, supply is considered elastic, meaning that a small change in price leads to a relatively larger change in quantity supplied. Conversely, if the elasticity of supply is less than 1, supply is considered inelastic, indicating that changes in price have a relatively smaller impact on quantity supplied.
In summary, the key difference between elasticity of demand and elasticity of supply is that demand elasticity focuses on the responsiveness of quantity demanded to price changes from the consumer's perspective, while supply elasticity focuses on the responsiveness of quantity supplied to price changes from the producer's perspective.