Price Elasticity of Demand vs Price Elasticity of Supply
Price Elasticity of Demand and Price Elasticity of Supply are two Elasticity concepts in AP Economics that students often mix up. In short: price elasticity of demand is price elasticity of demand measures how responsive quantity demanded is to a change in the good's price. Meanwhile, price elasticity of supply is price elasticity of supply measures how responsive the quantity supplied is to a change in price. Here is how they compare side by side.
Price elasticity of demand measures how responsive quantity demanded is to a change in the good's price.
It is the percentage change in quantity demanded divided by the percentage change in price. Demand is elastic when the absolute value is greater than 1 and inelastic when it is less than 1. Goods with many substitutes, that take a large share of income, or judged over a longer time horizon tend to be more elastic.
Price elasticity of supply measures how responsive the quantity supplied is to a change in price.
It is calculated as the percentage change in quantity supplied divided by the percentage change in price. Supply is considered elastic if the ratio is greater than 1, meaning the quantity supplied changes more than the price. Supply is inelastic if the ratio is less than 1.
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