Expanding the Concept of Elasticity

The elasticity concept does not even need to relate to a typical supply or demand curve at all. For example,

imagine that you are studying whether the Internal Revenue Service should spend more money on auditing tax

returns. We can frame the question in terms of the elasticity of tax collections with respect to spending on tax

enforcement; that is, what is the percentage change in tax collections derived from a given percentage change

in spending on tax enforcement?

With all of the elasticity concepts that we have just described, some of which are in Table 5.4, the possibility of

confusion arises. When you hear the phrases “elasticity of demand” or “elasticity of supply,” they refer to the
elasticity with respect to price. Sometimes, either to be extremely clear or because economists are discussing a

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