Elasticity

Elasticity is a term used in economics to describe relative rates of change of two variables x and y. The variables can be any with economic relevance, but in a mathematics course such as calculus, the two variables are usually "unit price "p", and number of units bought or sold q (in Hoffman, q and D are both used to name the number of units bought or sold.

ELASTICITY, E, or "price elasticity of demand", is then defined as follows:

E =      
[ dq

dp		 ]
[ q

p		 ]

Problems involving Elasticity will start with a relationship between p and q. The student will be asked to find the Elasticity at a particular value of p.

Example problem: If [q = p-2] , find the Elasticity , E, at p = 2.

Solution:

Differentiate to find dq
dp		 = -2p-3.

At p = 2, dq
dp		 = - 2 / 8 = -0.25, and [q / p] = [¼ / 2] = 1/8

Therefore , Elasticity , E = - (- 0.25) / (1/8) = +2

   
This page last
updated 27 October 2017