Elasticity

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Elasticity is the ratio of percentage changes of two variables. In economics, it is most commonly applied to measure the responsiveness of quantity demanded (or supplied) to changes in price, income, or price of other goods. For example, the price elasticity of demand is computed as percentage change in quantity demanded divided by percentage change in price, or


\frac{% \Delta Q}{% \Delta P} = \frac{\frac{Q_{new}-Q_{old}}{Q_{old}}}{\frac{P_{new}-P_{old}}{P_{old}}}


Since a price increase generally leads to a decrease in quantity demanded, elasticity is generally expressed as an absolute value; price-elasticity of demand is understood to be negative.

When two points are of interest, the [[Arc elasticity of demand|arc elasticity}} is used, rather than both point elasticities.

Elasticity may also refer to the stretchiness of a particular object, such as a rubber band.

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