1. Economics 214 Lecture 23 Elasticity

2. An elasticity measures a specific form of responsiveness. The percentage change in one variable that accompanies a 1% change in another variable. An elasticity is not affected by the units used to measure variables.

3. Elasticity

4. Arc Elasticity

5. PriceQuantity $84.419 $75.399 $66.804 $58.944 $412.50

6. Arc Elasticity from P=6 to P=5

7. Point Elasticity at P=$5.50

8. Point Elasticity our Demand Function

9. Point Elasticity for Constant Elasticity Demand Function

10. Elasticities The terms elastic, unit elastic, and inelastic represent elasticities that are, in absolute value, greater than 1, equal to 1, and less than 1, respectively.

11. Linear Demand Function

12. Figure 7.1 Elasticities of a Linear Demand Function

13. General Elasticity Rule

14. Constant elasticity demand function

15. Tax Incidence Example

16. Tax Incidence continued