Elasticity

Bulan Prabawani
Elastisitas
 to measure changes in the number of
items purchased due to changes in other
factors
 Its price, income, competitor price
1. Price Elasticity
2. Income Elasticity
3. Cross Elasticity
Price E
 shows the relationship between changes in the number of items
purchased due to price changes.

2 method:
Two point elasticity (arch elasticity)
∑d = ∆Q : ∆P
Q1 + Q2 P1 + P2

One point elasticity (point elasticity)

∑d = ∆Q : ∆P
Q1 P1
In which:
∑d = Elasticity coefficient
Q = quantity
P = price
 (-) is neglected – mid point formula
Total spending

 obtained by multiplying the price (P) and the

number of items purchased (Q)

Product elasticity depending on:

a. Complementary/substitution?
b. Vital product?
c. Price relative to value?

Total spending if...

d Demand P decrease P increase
>1 Elastis Increase Decrease
<1 Inelastis decrease Increase
=1 Unitary Stabile Stabile
Elasticity usage, i.e:
Macro: Micro:
- agricultural subsidies - Cross subsidy in firm
- Minimum wage - Pricing strategy
Income E
 shows the relationship between changes in the
number of items purchased due to income changes.

∑i = ∆Q : ∆Y
Q1 Y1

In which:
∑i = elasticity coefficient
Q = purchased amount
Y = income
If Y increase Q increase  luxury good
If Y increase Q decrease  inferior good
Cross E
 shows the relationship between changes in the number of
items purchased due to another price changes.
∑Cxy = ∆Qx : ∆Py
Qx1 Py1

In which:
∑ Cxy = elasticity coefficient bertween good x and y
Qx = the X good amount
Py = the Y price
If:
Py increase Qx increase  substitution
Py increase Qx decrease  complementary
Py increase Qx stabile  independent
Questions
Price E
The pricing fall of an Android camera from 3.5 million to 2.5
million caused the number of purchases to increase from 100
units to 150 units.

Income E
The increase of Semarang UMR 10% from Rp1,000,000, causing
TV purchases of all brands to increase from 15 units to 20 units
per month.

Cross E
Because the premium price rose from Rp6,000 to Rp8,500, the
demand for diesel engine vehicles rose to 10 units per month
(previously 5 units).
Supply E
 shows the relationship between changes in the number of items purchased
due to the price changes.

∑s = ∆Q : ∆P
Q1 P1
In which:
∑s = supply elasticity
Q = amount sold
P = price

Example
The pricing fall of Computer A from Rp5 million to Rp4 million, due to the
emergence of the newest type of Computer X caused a decrease in the number
of Computers A offered from 25 units to 10 units/month.
Graphs