Macroeconomics › Section E · Elasticity › Topic E.1
Price elasticity of demand and supply
Knowing that quantity falls when price rises is easy. Knowing by how much decides whether a price rise earns a firm money or loses it, and whether a tax shrinks a market or just fills the treasury. Elasticity is the number that answers 'by how much'.
In this topic
- From direction to magnitude
- Price elasticity of demand
- The midpoint method
- Worked example: a café raises its latte price
- Reading the number: elastic or inelastic
- What makes demand elastic
- Total revenue and the revenue test
- The supply-side twin
- Worked example: elasticity of fish supply
- Elasticity in the wild
- Common mistakes to avoid
- Key takeaways
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