Elasticity

This course is a part of Microeconomics, a 7-course Topic series from Khan Academy.

Price elasticity of demand and supply. How sensitive are things to change in price?

This course contains 3 segments:

Price elasticity of demand

You're familiar with supply and demand curves already. In this tutorial we'll explore what implications their steepness (or lack of) implies. Price elasticity is a measure of how sensitive something is to price.

Price elasticity of supply

According to the law of supply, when the price of a good increases the quantity supplied increases. But by how much? Price elasticity of supply answers that, and how responsive suppliers are to changes in price reflect aspects of the production process, such as the time frame, substitutibility of resources, and ability to switch production to other goods. Learn how to calculate and interpret price elasticity of supply, as well as the determinants of price elasticity of supply, in this lesson.

Income elasticity of demand and cross-price elasticity of demand

When consumers' income changes, they buy more of some goods and less of others. Income elasticity of demand is a measure of those changes. Once we calculate income elasticity, we can use that value to determine whether consumers consider goods normal or inferior. Apples and oranges are substitutes for each other... unless you are making a fruit salad! We can determine whether consumers view goods as complements or substitutes by calculating and interpreting the cross-price elasticity of demand.