Chapta 5

Chapter 5 is all about elasticity of supply and demand. Elasticity is the measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants. Price elasticity of demand is a measure if how much the quantity demanded of a good responds to change in the price of that good computed as the percentage chance in the quantity demanded divided by the percentage change in price. There is also cross price elasticity and Income elasticity. Cross price elasticity is a measure of how much the quantity demanded of one good responds to a change in the price of another good computed as the percentage change in quantity demanded by the percentage change in the price of the second good. Income elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in consumers income computed as the percentage change in quantity demanded divided by the percentage income.