Elasticity

ELASTICITY

by Anton Antonio

March 9, 2015

Elasticity is a term commonly used in economics.  Perhaps, what come to our minds is the relationship of economics to natural science or the environment and natural resources management field.  Environmental science is multidisciplinary and, therefore, also involves other fields of study; including economics.  The fact that natural resources are tradable commodities, economics would always come into play.

In economics, elasticity is the measurement of how responsive an economic variable is to a change in another variable.  The variable most affected by elasticity is price.  Price elasticity of demand (PED) is a measure used in economics to show the responsiveness (or elasticity) of the quantity demanded of a good or service to a change in its price.  Price elasticity of supply (PES) measures the relationship between a change in quantity supplied and a change in price.  If supply is elastic, producers can increase output without a rise in cost or a time delay.  If supply is inelastic, business enterprises find it difficult to change production in a given time period.

The factors affecting price elasticity are: (1) Availability of substitute goods and services; (2) The number of uses and application for a specific good and service; (3) Price of a good or service relative to the consumer’s income; (4) Whether the good or service is a necessity or considered a luxury… a differentiation between needs and wants; and, (5) Where price is established on the demand curve.

These are the factors and variables affecting price elasticity.

Just my little thoughts…

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