wide variety of elasticities, we will call the elasticity of demand or the demand elasticity the price elasticity of

demand or the “elasticity of demand with respect to price.” Similarly, economists sometimes use the term

elasticity of supply or the supply elasticity, to avoid any possibility of confusion, the price elasticity of supply or

“the elasticity of supply with respect to price.” However, in whatever context, the idea of elasticity always refers

to percentage change in one variable, almost always a price or money variable, and how it causes a percentage

change in another variable, typically a quantity variable of some kind.

TABLE 5.4 Formulas for Calculating Elasticity
130 5 • Elasticity

TABLE 5.4 Formulas for Calculating Elasticity

BRING IT HOME

That Will Be How Much?
How did the 60% price increase in 2011 end up for Netflix? It has been a very bumpy ride.

Before the price increase, there were about 24.6 million U.S. subscribers. After the price increase, 810,000
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