Jim Whitney Economics 102

Elasticity formulas

%DQ
General formula for market elasticities (e):   e = ---------
%DX
where X=something which influences Q, such as price (P)
Common elasticities:
%DQd
Own-price elasticity of demand: e = ---------
%DP
e is negative, but we'll usually drop the minus sign.
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%DQd
Income elasticity of demand: eI = ---------
%DI
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%DQdx
Cross-price elasticity of demand: exPy = ---------
%DPy
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%DQs
Elasticity of supply: eS = ---------
%DP
Calculating arc elasticity:
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    Arc elasticity (eARC): elasticity for a distinct pair of points (X1,Q1) and (X2,Q2):
DQ/avgQ     DQ=(Q2-Q1)
eARC = ---------

where:

    avgQ=(Q1+Q2)/2
DX/avgX     DX=(X2-X1)
    avgX=(X1+X2/2
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