Editing Elasticity (economics) (section)

== Definition ==
Elasticity is the measure of the sensitivity of one variable to another.<ref>{{Cite web |title=The Economic Times: Business News, Personal Finance, Financial News, India Stock Market Investing, Economy News, SENSEX, NIFTY, NSE, BSE Live, IPO News |url=https://economictimes.indiatimes.com/defaultinterstitial.cms |access-date=2023-04-20 |website=economictimes.indiatimes.com}}</ref> A highly elastic variable will respond more dramatically to changes in the variable it is dependent on. The x-elasticity of y measures the fractional response of y to a fraction change in x, which can be written as
:x-elasticity of y: <math>\varepsilon = \frac{\partial y / y}{\partial x / x}</math>

In economics, the common elasticities (price elasticity of demand, price elasticity of supply, and cross-price elasticity) all have the same form:
:P-elasticity of Q: <math>\varepsilon = \frac{\partial Q / Q}{\partial P / P}</math> if [[Continuous function|continuous]], or <math>\varepsilon = \frac{\frac{Q_2-Q_1}{Q_1}}{\frac{P_2-P_1}{P_1}} = \frac{\%\ \mbox{change in quantity Q}}{\%\ \mbox{change in price P}}</math> if discrete.
{| class="wikitable"
|-
| <math>|\varepsilon|>1</math> || elastic || Q changes more than P
|-
| <math>|\varepsilon|=1</math> || unit elastic || Q changes like P
|-
| <math>|\varepsilon|<1</math> || inelastic || Q changes less than P
|}

Suppose price rises by 1%. If the elasticity of supply is 0.5,  quantity rises by .5%; if it is 1, quantity rises by 1%; if it is 2, quantity rises by 2%.

Special cases:
:Perfectly elastic: <math>\varepsilon\rightarrow\infty</math>; quantity has an infinite response to even a small price change.
:Perfectly inelastic: <math>\varepsilon=0</math>; quantity does not respond at all to a price change.