ENDURING UNDERSTANDING

MKT-3
Individuals and firms respond to incentives and face constraints.

LEARNING OBJECTIVE ESSENTIAL KNOWLEDGE
  • MKT-3.E
    a. Define measures of elasticity.
    b. Explain (using graphs where appropriate) measures of elasticity and the impact of a given price change on total revenue or total expenditure.
    c. Calculate (using data from a graph or a table as appropriate) measures of elasticity.
ESSENTIAL KNOWLEDGE
  • MKT-3.E.6
    Price elasticity of supply is measured by the percentage change in quantity supplied divided by the percentage change in price, or the responsiveness of the quantity supplied to changes in price.
  • MKT-3.E.7
    Ranges of values of elasticity of supply are described as elastic or inelastic with the separating benchmark being a magnitude of 1, where the change in the price and the change in the quantity supplied are proportional.
    a. When the magnitude of the value of elasticity is greater than 1, the supply is described as being elastic with respect to that price in the range of the given change.
    b. When the magnitude of the value of elasticity is less than 1, the supply is described as being inelastic with respect to that price in the range of the given change.
    c. When the magnitude of the value of elasticity is equal to 1, the supply is described as being unit elastic with respect to that price in the range of the given change.
  • MKT-3.E.8
    The price elasticity of supply depends on certain factors such as the price of alternative inputs.