Talk:Elasticity (economics)

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Talk:Supply and demand[edit]

Hi, see the discussion on Talk:Supply and demand. I'm trying to put a summary of the elasticity concept into that article to help it along to being a featured article. Thanks, Taxman 17:19, Jun 19, 2004 (UTC)

This page sure could use some real world examples! It also, the latter half seems to be far more macro economic than micro; which makes for a bumpy ride. User:Bhyde

variables[edit]

P is price. What is Q?--Gbleem 05:46, 15 December 2005 (UTC)

Quantity --Feinstein 22:11, 15 December 2005 (UTC)

Note that if calculating PED in the vernacular of economics you are measuring the responsiveness of quantity demanded to price changes. If you are calculating YED you are measuring demand to changes in price.Jgard5000 (talk) 01:59, 6 October 2009 (UTC)jgard5000

unit elasticity[edit]

I fail to see how the current diagram depicts unit elasticity. Qwe 08:06, 5 February 2006 (UTC)

I also have a problem with this "simple example". While its true that P/Q remains constant, the difference in slope means that both cannot have the same elasticity at any one price or quantity, since elasticity is the product of the ratio, P/Q, and the slope. I'd like to see this changed, but I am not entirely sure how to demonstrate this easily in a more correct fashion. Sirkha 17:18, 10 December 2006 (UTC)
Actually, they have the same elasticity at all prices; I didn't see it right away, either, but since the intercepts are 0 for both, both are unit elastic. It works out pretty easily if you apply the definition:
E_{Q,P} = \left|\frac{\partial \ln Q}{\partial \ln P}\right| =  \left|\frac{\partial Q}{\partial P}\cdot\frac{P}{Q}\right| = \left|\frac{\Delta Q}{\Delta P}\cdot\frac{P}{Q}\right| = \left|\frac{Q-0}{P-0}\cdot\frac{P}{Q}\right| = \left|\frac{Q}{P}\cdot\frac{P}{Q}\right| = 1
Maybe there should be a bit more of an explanation in that part of the article? For one thing, it's the product of P/Q and the reciprocal of the slope, which might have been what caused your confusion, Sirkha. --Dirk Gently 03:02, 25 February 2007 (UTC)
Same problem here. Maybe this graph is more helpful: http://en.wikipedia.org/wiki/Image:Price_elasticity_of_demand_and_revenue.png taken from this article http://en.wikipedia.org/wiki/Price_elasticity_of_demand --Chris, October 25, 2007 —Preceding unsigned comment added by 195.204.103.254 (talk) 13:49, 25 October 2007 (UTC)

Mathematical Definition[edit]

While it is interesting to show what the slope is on the graph, in economics, these two axis are not typically the "x" and "y" axis, but the "P" and "Q" axis. The use of x and y makes it hard to correspond elasticity to price and quantity. Sirkha 17:22, 10 December 2006 (UTC)

Jargon, jargon, jargon[edit]

I think, there are too many jargons that the article is not useful to layperson. I've added what elasticity means in everyday language, rather than what is typically explained in economic classes. __earth (Talk) 07:14, 8 April 2007 (UTC)

Definition of terms in Application section[edit]

The end of the Application section says "And at E=-1, demand is unit elastic (or unitary elastic), and thus MC=MB and MNB=0". While MR (used earlier) was defined previously as "marginal revenue", there is no definition of MC, MB, and MNB and I don't know what they mean (otherwise I'd edit the article). --Ishi Gustaedr (talk) 17:23, 3 July 2008 (UTC)

Applications section: demand and supply[edit]

The first paragraph in this section talks only about demand. The second paragraph talks about long-term elasticity, but talks about supply. It would be good if the first paragraph could explain that elasticity can describe both supply and demand. (I'm a non-expert so I haven't madde the change myself) —Preceding unsigned comment added by 139.133.7.37 (talk) 11:00, 22 January 2009 (UTC)

Article needs to be more accessible[edit]

Elasticity is not that complex, at least not at a basic level. Yet even the summary in this article is hard to understand. Maybe it should start with a simplified concept, such as "in an elastic market lowering prices increases profits but in an inelastic market raising prices increases profits" and then build on that. As it stands this article is not very accessible to those unfamiliar with the concept. 65.197.19.244 (talk) 20:26, 14 May 2009 (UTC)

What about saying that elasticity is really elasticity of "demand." Thus for an elastic good, as the price increases, the purchasers are "flexible" to choose an alternate good or not buy the product at all. This corresponds with the fact that an elastic good has a ratio over 1, since elasticity is a ratio of the percentage change in the demand over the percentage change of the price. Thus when a good is elastic the demand is changing more than the price is changing. As a result, the ratio is over 1.

Similarly, when a good is inelastic, the demand is changing less than the increase in price; the ratio is under 1; and the purchasers are "inflexible." Meaning the purchasers still want the good even when the price is increased. — Preceding unsigned comment added by Hardy1234 (talkcontribs) 00:05, 2 April 2012 (UTC)

Issues[edit]

Hello - First, this page needs to be edited - there are quite a few spelling errors. Second, I believe that this article is much too mathematical to be labeled as introductory. The topic is far too important to be of interest only to those interested in econometrics. Write it for a "math phobe" and put the math in an advanced article!23:47, 8 October 2009 (UTC)Richard Betts —Preceding unsigned comment added by 99.162.153.32 (talk)

Edited the "complement good" link to read "complementary good"[edit]

In the section "Interpreting cross-price elasticity of demand," I edited the link that previously read "complement good" to read "complementary good" for 2 related reasons: (1) the page titled "Complement good" (Complement_good) redirects to the page titled "Complementary good" (Complementary_good). (2) "Complementary good" is, in fact, the correct terminology, but "complement good" is most definitely NOT correct. See my more complete explanation of the correct terminology at Talk:Complementary_good&action=edit&section=3 on the talk page for Complementary_good. --Jackftwist (talk) 17:53, 29 March 2010 (UTC)

Tax-incidence section[edit]

In your numerical example in this section, you state:

If a purpose of the tax is to reduce smoking its deterrent effect will be undercut by two factors. First the seller can pass through 56% of the tax to the buyer. In other words the buyer has a relatively high tolerance for absorbing the tax and continuing to smoke; they may prioritise smoking over the purchase of other goods.

(I added the italics to "two factors" for emphasis.)

That sounds like only 1 factor -- it's just the interpretation of what relatively inelastic demand (i.e., <1) means. The 2nd sentence starts out "first," but where's the "second"?

I added lack of close substitutes to the explanation at the end, because that's almost certainly a contributing factor in this case. Also, I deleted "may" for accuracy -- there's no "may" about it. Again, that's what relatively elastic demand means (at least indirectly). --Jackftwist (talk) 17:17, 30 April 2010 (UTC)

Why start with the ∂lnX / ∂lnY definition?[edit]

I'm curious why the original author started the article by defining elasticity with the equation

E_{x,y} = \left|\frac{\partial \ln x}{\partial \ln y}\right| = \left|\frac{\partial x}{\partial y}\cdot\frac{y}{x}\right|

The basic definition

E_d = \frac{\%\ \mbox{change in quantity demanded}}{\%\ \mbox{change in price}} = \frac{\Delta Q_d/Q_d}{\Delta P/P}

is equally general and far more intuitive. (For generality, X and Y could be substituted for Qd and P.) From there, the article can go on to show all the equivalent forms of the equation, like

E_d = \frac{P}{Q}\times\frac{dQ}{dP}

and its partial derivative counterpart

E_{x,y} = \left|\frac{\partial x}{\partial y}\cdot\frac{y}{x}\right|

The "ln" form of the definition is usually found only in some intermediate and advanced micro texts, or texts on mathematical economics, because it's really only the result of a convenient mathematical coincidence that {d \ln x/dx = 1/x}, which can be manipulated to match part of the definition of elasticity. But this form has absolutely no intuitive meaning and needlessly deters the beginning student or casual reader from reading further. (I.e., see the post above complaining about a related point.)

Even in the intermediate texts, the "ln" form is brought up only as the very last form of the equation, often only in an "OBTW" fashion. Even Chiang's math econ text covers it in a section titled "Further Applications of Exponential and Logarithmic Derivatives" (italics added for emphasis). He initially defines elasticity in a much earlier chapter in the simpler form shown as the middle equation (Ed) above.

It would be much better to follow the typical textbook approach of beginning with the most elementary, intuitive definition (%∆x / %∆y as shown above) and build up to the "ln" form from there -- much later in the discussion! --Jackftwist (talk) 18:57, 30 April 2010 (UTC)

Re: I tend to agree with this. The definition in the article is far from intutive, and too technical. Someone who does not know what is elasticity, and comes to wikipedia to find out, will definitelly not get it based on this article. So I do not think it is a good encyclopedia entry to make it too technical.
I agree as well, although I would take issue with the claim that the ln form is "really only the result of a convenient mathematical coincidence". One can intuitively consider the mathematical definition of elasticity as the instantaneous rate of change of the logarithms of the quantities involved. This makes mathematical sense, because the logarithm converts incremental relative changes of a variable into incremental NON-relative changes. This follows immediately from the properties of the logarithm. Also, elasticity has a very intuitive graphical visualization -- namely, if you make a log-log plot of the data, then elasticity is the slope of the tangent line. So the fact the logarithm function appears is anything but "convenient" or arbitrary. — Preceding unsigned comment added by 198.189.14.2 (talk) 19:24, 5 July 2011 (UTC)
Here's what I mean specifically about why log function is important. Consider two points x1 and x2, and suppose f(x1) and f(x2) both change 3%, so change to (1.03)*(f(x1)) and (1.03)*(f(x2)), respectively. Their absolute increments are then (0.03)*(f(x1)) and (0.03)*(f(x2)), which are different in general, since f(x1) and f(x2) are different. But since these are both 3% increments, we want them to be considered equal as increments. How to do this? Well, one way is to take the logarithms of the function f. Then we are looking at ln(f(x1)) and ln(f(x2)), are they change incrementally to ln((1.03)*f(x1)) and ln((1.03)*f(x2)). What are the absolute increments of the log(f)? Well, because the log function turns products into sums, they have changed into ln(1.03) + ln(f(x1)) and ln(1.03) + ln(f(x2)), so the absolute increment in each case is ln(1.03). And this is just as it should be -- if we take the increment of the original function, a 3% change is not constant across scale, but if we take logarithms first, now a 3% change in the original function is represented by the same increment regardless of scale.
This may be a bit math-heavy reasoning for some, but my point is just to counter the claim that the introduction of the logarithm is totally unmotivated or a freaky coincidence. Just the opposite, it's exactly the right function for the job if you consider the situation. Maybe someone can explain this motivation in the article. — Preceding unsigned comment added by 198.189.14.2 (talk) 19:56, 5 July 2011 (UTC)

Changes[edit]

Currently, this article replicates information from other articles in addition to including various random facts relating to the concept (like the stuff about the tobacco tax) which essentially amounts to economics trivia. I'm going to rework this article so that it introduces the general concept of elasticity and also serves as an extended disambiguation page to various sub articles where most of the information properly belongs (some of these articles need some work so help would be appreciated).radek (talk) 00:53, 2 May 2010 (UTC)

A few weeks ago I moved a great deal of information into those separate articles, so you should be clear for pruning this one back without losing information. It's definitely a mess. - Jarry1250 [Humorous? Discuss.] 21:22, 5 May 2010 (UTC)

estimates[edit]

At the moment the articles cites the Huthakker and Taylor study which is from 1970! Having a ref to estimates that are 40 years old in the article is a bit embarrassing. I know that there's been a lot more of these kinds of studies and it has been updated but can't think of a specific general survey off the top of my head. Anyone's got a more recent reference?radek (talk) 01:52, 2 May 2010 (UTC)

coeffient of elasticity of demand —Preceding unsigned comment added by 41.217.232.2 (talk) 18:15, 28 September 2010 (UTC)

semi-elasticity[edit]

Several articles in wikipedia use the term "semi-elasticity" (just use the search), while it is absolutely not clear what does semi-elasticity stand for, in comparison to to elasticity for example. Could someone who knows this actually update this article on elasticity or create a new one on semi-elasticity? —Preceding unsigned comment added by 78.41.129.24 (talk) 09:10, 24 January 2011 (UTC)

Semi-elasticity is just another term for logarithmic derivative. — Preceding unsigned comment added by 198.189.14.2 (talk) 19:29, 5 July 2011 (UTC)

Finish this sentence...[edit]

A commodity is said to be elastic if... — Preceding unsigned comment added by 137.43.188.142 (talk) 11:04, 23 March 2012 (UTC)

it measures the responsiveness of quantity demanded to the changes in price

This article needs a disambiguation header.[edit]

I came to this article by searching for "inelastic" and I wanted to learn about the physical, mechanical property, which has little to do with economics. There is no disambiguation header, so now I'm not sure how to find the subject I'm interested in.

There is already a disambiguation page for "elasticity": https://en.wikipedia.org/wiki/Elasticity

Can we redirect "inelastic" and "inelasticity" to that page? — Preceding unsigned comment added by 70.36.196.174 (talk) 17:17, 21 September 2013 (UTC)


Relevance to distribution of income or distribution of wealth?[edit]

The article claims that the concept of elasticity is useful in understanding the distribution of wealth. Am I confused, or should this be income distribution? 31.53.169.115 (talk) 13:39, 5 June 2014 (UTC)