Note: The original VNote structure and wording are preserved. Only clear errors or statistical/institutional definitions that have changed are corrected minimally.

1. Demand

1.1. Price Elasticity of Demand

1.1.1. What It Is

1.1.1.1. Elasticity Coefficient

• 

1.1.1.2. Price Elasticity of Demand

• 
  • The numerator is the percentage change in quantity demanded.
  • The denominator is the percentage change in price.

1.1.2. Calculation Methods

1.1.2.1. Point Elasticity

• Substitute the two points directly.
• 
• The results differ because different calculation bases are used.

1.1.2.2. Arc Elasticity

• Calculate using the average of the two points.
• 

1.1.2.3. Arc Elasticity vs. Point Elasticity

• 
• When the price change is very small, point elasticity is more precise.

1.1.3. Types

• e > 1: elastic
• e < 1: inelastic
• e = 1: unit elastic
• e = 0: perfectly inelastic
• e = infinity: perfectly elastic
• For the same good, elasticity can be higher at a high-price portion of the demand curve and lower at a low-price portion.

1.1.4. Factors Affecting Price Elasticity of Demand

• How necessary the good is
• Degree of substitutability
• Share of total expenditure or income
• Number of uses
• Breadth of the category
• Time horizon

1.1.5. Uses

• Pricing
  • Elastic demand: a price cut may increase total revenue (subject to cost, competition, and the position on the demand curve).
  • Inelastic demand: a price increase may increase total revenue (still subject to cost, competition, and long-run demand).

1.2. Income Elasticity of Demand

1.2.1. What It Is

• The percentage change in quantity demanded caused by a 1% change in consumer income.
• e > 0: normal goods
  • 0 < e < 1: necessities
  • e > 1: luxury goods
• e < 0: inferior goods

1.2.2. Uses

• Determine the nature of a good
• Compare living standards
• Adjust export and product structure

1.3. Cross Elasticity of Demand

1.3.1. What It Is

• exy: change in demand for x caused by a change in the price of y.
• eyx: change in demand for y caused by a change in the price of x.

1.3.2. Uses

• exy > 0: substitutes
• exy < 0: complements
• exy = 0: independent goods
• Help firms adjust product structure and pricing.

2. Supply

2.1. Elasticity of Supply

2.1.1. What It Is

• The change in quantity supplied caused by a change in the price of the good.

2.1.2. Calculation Methods

2.1.2.1. Point Elasticity

2.1.2.2. Arc Elasticity

2.1.3. Types

• e = infinity: perfectly elastic
• e = 0: perfectly inelastic
• e = 1: unit elastic
• e < 1: inelastic
• e > 1: elastic

2.1.4. Factors Affecting Elasticity of Supply

• Production difficulty
• Production-cost changes
• Production scale
• Availability of inputs
• Time

2.1.5. Uses

• “A small boat is easier to turn” -> larger e.