NAME : Dimas Yusup Baharudin

NIM : 4101416017
SUBJECT : Economical Mathematics

ELASTICITY

1. DEFINITION OF ELASTICITY

Elasticity is a degree of sensitivity to an economic phenomenon as well as the symptoms of

other economic changes. Or, we can conclude that the elasticity is the degree of sensitivity of
changes in the amount or quantity of goods caused by the change of other factors. To measure the
degree of sensitivity of an economic phenomenon, the measure used is the ratio or percentage
change in the quantity of goods, be it goods or goods requested that offered views of the percentage
change in the factors that cause it to change the quantity of items.

Mathematically, if the elasticity coefficient and is denoted by then:𝑦 = 𝑓(𝑥)𝜂

Δ𝑦
𝑦 Δ𝑦 𝑥
𝜂= Δ𝑥 ⇔ 𝜂 = Δ𝑥 . 𝑦
𝑥

By taking, then the equation:Δ𝑥 = 0

Δ𝑦 𝑥 𝑑𝑦 𝑥
𝜂 = lim . = .
Δ𝑥→0 Δ𝑥 𝑦 𝑑𝑥 𝑦

Prices are abslout, pales in the calculation, a negative value then the price is taken from
absolute price. A function is called elastic if it has a price If you or the function was called unity
elastic or nelastic at a point that has been ditentukam. Consider the following picture𝜂𝜂𝜂 > 1. 𝜂 =
1𝜂 < 1

Picture 1 Figure 2
 Based on Figure 1 can be argued that the AB stated AO function of marginal while presenting
an average function. Prices so. As a result, the price of the marginal function at point A is less than
the average price function. Thus, the conclusion is the elasticity of total function at point A is less
than 1 or nelastic. In contrast, in Figure 2, so. As a result, the total function at point A is elastic.𝛼 <
𝛽𝑡𝑔 𝛼 < 𝑡𝑔𝛽𝛼 > 𝛽𝑡𝑔𝛼 > 𝑡𝑔𝛽

For the case of an elastic unity can be explained using the following image.

In Figure 3, the total function has a negative slope. Detemined point A on the curve so that
the lines OA and AB makes an angle equal to the positive X-axis (the opposite direction) or in the
same direction when the positive berslope total function (Figure 4). As a result, so. Thus the price
of the marginal function at point A will be equal to the average function thus obtained.𝛼 =
𝛽𝑡𝑔 𝛼 = 𝑡𝑔𝛽𝜂 = 1

The cause of the change in the quantity of goods demanded or offered can we differentiate
into 3 parts, namely: The price of the goods themselves, the price of other goods, and income or
income.

2. TYPES OF ELASTICITY

1) Elasticity of Demand
The elasticity of demand measures how much the sensitivity of changes in the number of
goods demand to price changes. The demand schedule depicted graphically called the
demand curve (demand curve).

Things that affect the elasticity of demand is:

a. The level of convenience goods are replaced by other goods

b. The amount of the proportion of income used to purchase an item
 c. Duration of analysis of the changes occurring in the market
d. The type of goods required (basic goods, luxury goods or normal

Consider the following picture.

At the level of prices, quantity of goods demanded. The quantity of goods demanded will rise if
the price of goods goes down, and vice versa. Thus the nature of the demand curve is called called
laws demand that fell sideways (the law of downward-sloping demand). This law can be explained
from two aspects, namely:P0 Q0 (Q0 → Q2 )(P0 → P2 )

a. The fall in prices will result in the entry of new buyers

b. The fall in prices can encourage each customer to increase their consumption. (Samuelson,
1970).

The quantity of goods demanded is a function of price. Mathematically can be written

Thus, the elasticity of demand (an item to the price) can be defined as the ratio of the
relative change in the quantity demanded and the relative change in prices of goods in
question (Legowo, 1984).𝑄𝐷 = f(p).
 There are 4 kinds of concepts elasticity of demand, namely:

1. Price Elasticity

Is the elasticity measures the sensitivity of quantity demanded of a good change due to
changes in the price of goods in question (Wantara, 1995).

Can be formulated as follows:

𝑑𝑄𝐷
𝜂 = 𝑑𝑃
𝑄𝐷
𝑃
Example :

1. A demand function have something in common:. Determine the magnitude of the price
elasticity for and provide an economic interpretation.𝑄𝐷 = 100 – 2𝑃𝑃 = 20
Answer :
Known: 𝑄𝐷 = 100 – 2𝑃
𝑑𝑄𝐷
*) The equation of marginal functions: = −2
𝑑𝑃
𝑄𝐷 100 100
**) Average equation function: to = −2= − 2 = 3𝑝 = 20
𝑃 𝑃 20

2 2
From *) and **) obtained sehingaa 𝜂 = − 3 |𝜂| = 3

Interpretation of the economy is the quantity of goods demanded to increase by 66.67% if

the price of the item down 100%.

𝑘
2. Known 𝑄𝐷 = 𝑝𝑛 ; 𝑘, 𝑛 ∈ 𝐵 +
a. Are large price elasticity (demand) depends on the price of goods (question)?
Investigate.
b. If n = 1, what does it mean?

Answer :
𝑑𝑄𝐷
*) = 𝑛𝑝−𝑛−1
𝑑𝑃
 𝑄𝐷
**) = 𝑘𝑝−𝑛−1
𝑃

From *) and **) acquired or 𝜂 = −𝑛|𝜂| = 𝑛

Large price elasticity is a constant n. So, do not depend on the price of goods (in question). If n =
1 then the quantity of goods demanded will increase by a decrease in the price of the goods
concerned or the nature of unity elastic.

2. Elasticity Cross Elasticity or Silang

Is the elasticity measures the sensitivity of changes in demand for the goods in respect of
other changes in the price of goods (Wantara, 1995). The relationship between the two types of
goods can be divided into two, namely substitution and complementary. A so-called substitute
goods goods goods B if any increase in the price of goods A will result in a rise in the demand
quantity of the goods B, and vice versa. For example, any increase in the price of rice will result
in a reduction in the quantity of rice provided by customers. Public (consumers) will consume corn
ata sago instead of rice. As a result, the quantity of corn or maize requested increase. Sago and
maize are substitutes for rice. The relationship between the pen and ink, camera and film, or a
different bottles and caps with rice and corn. The relationship of these items is called
complementary. That is, any increase in the price of the camera will result in a reduction in the
quantity requested movie, and vice versa.
A quantity of goods demanded influenced by the price of A and B. Mathematically can be
written:𝑄𝐷𝐴 = 𝑓(𝑃𝐴 , 𝑃𝐵 )

Cross elasticity of demand can be formulated as follows:

𝜕𝑄𝐷𝐴 𝑃
𝜂𝐴𝐵 = .𝑄𝐵
𝜕𝑃𝐵 𝐷𝐴

and
𝜕𝑄𝐷𝐵 𝑃
𝜂𝐵𝐴 = .𝑄𝐴
𝜕𝑃𝐴 𝐷𝐵

by criteria

- if 𝜂𝐴𝐵 < 0 or 𝜂𝐵𝐴 < 0 then the relationship between the objects A and B is
- if 𝜂𝐴𝐵 > 0 or 𝜂𝐵𝐴 > 0 then the relationship between the objects A and B are
complementary
-
Example:

A function of demand are two kinds of goods relating formulated as follows.

𝑐 𝑐
𝑄𝐷𝐴 = 𝑃2 .𝑃 and 𝑄𝐷𝐵 = 𝑃 ;𝑐 > 0
𝐴 𝐵 𝐴 .𝑃𝐵

Determine the price elasticity of demand items A, B, and AB cross elasticity.

Answer:
1) Elasticity Price Request Item A
𝜕𝑄𝐷𝐴 −2𝑐
=
𝜕𝑃𝐴 𝑃𝐴3 .𝑃𝐵
−2𝑐 𝑃𝐴
So, 𝜂𝐴= 𝑃2 .𝑃 . 𝑐 = −2
𝐴 𝐵
𝑃2
𝐴 .𝑃𝐵

That is, the quantity of goods A which are required to be increased by 200% when a decline
in the price of goods A at 100%.
2) Demand Price Elasticity Item B
𝜕𝑄𝐷𝐵 −𝑐
=𝑃 2
𝜕𝑃𝐵 𝐴. 𝑃𝐵

−𝑐 𝑃𝐵
So, 𝜂𝐵= 𝑃 2 . 𝑐 = −1
𝐴. 𝑃𝐵 𝑃𝐴 .𝑃𝐵

That is, the quantity demanded of goods B will increase by the price reduction that occurred
in the goods concerned.

3) Cross Elasticity of Demand

𝜕𝑄𝐷𝐴 −𝑐
*) = 𝑃2 𝑃2
𝜕𝑃𝐵 𝐴. 𝐵

−𝑐 𝑃𝐵
So, 𝜂𝐴𝐵= 𝑃2 𝑃2 . 𝑐 = −1
𝐴. 𝐵 𝑃2
𝐴 .𝑃𝐵

𝜕𝑄𝐷𝐵 −𝑐
**) = 𝑃2 𝑃
𝜕𝑃𝐴 𝐴. 𝐵

−𝑐 𝑃𝐴
So, 𝜂𝐵𝐴= 𝑃2 𝑃 . 𝑐 = −1
𝐴. 𝐵 𝑃𝐴 .𝑃𝐵

That is, the quantity of goods A which prompted consumers to increase by the increase in
prices of goods B.

Cross elasticity of demand () indicates the items A and B are replacing (substitution) 𝜂𝐴𝐵, 𝜂𝐵𝐴 <
0
3. Income or Income Elasticity
The income elasticity describes the ratio or percentage change in the quantity of a good
demanded or offered by the percentage change in revenue / income. Ceteris paribus condition is
an assumption that must be met for keberlakukan the law of demand. Consider the following
picture.

Income is one element of ceteris paribus. If the consumer's income changes, there will be a shift
in the demand curve. In general, the quantity of goods demanded will rise when income received
will go up so that the demand curve shifts to the right. This will apply the opposite, namely a shift
in the demand curve to the left (up, especially for inferior goods, such as low quality maize.(𝐷 →
𝐷’)𝐷 → 𝐷′′)
When linked to the relationship between the two types of goods, such as A and B then A quantity
of goods demanded, in addition affected by the price of A and B, as well as by consumer income
(I). Mathematically can be formulated as:

𝜕𝑄𝐷𝐴 𝐼
𝜂𝐴𝐼 = .
𝜕𝐼 𝑄𝐷𝐴

If the goods A is a superior good. If the goods A is a neutral item. If the item A is inferior
goods.𝜂𝐴𝐼 > 0𝜂𝐴𝐼 = 0𝜂𝐴𝐼 < 0

Example :

The function of the demand for goods A are: 𝑄𝐷𝐴 = −2𝑃𝐴 + 5𝑃𝐵 + 0,5𝐼

Determine if the income elasticity of the price per unit of goods A and B respectively Rp 100 and
Rp 200, while consumer income of Rp 500,000.
Answer:

𝜕𝑄𝐷𝐴
*), To and then = 0,5𝑃𝐴 = 100, 𝑃𝐵 = 200, 𝐼 = 500.00
𝜕𝐼

𝑄𝐷𝐴 = 250.800

500.000
**) 𝜂𝐴𝐼 = 0,5. 250.800 = 0,9968

That is, if the consumer's income has increased by 100% then quantity demanded A goods will
rise by 99.68%.𝜂𝐴𝐼 > 0, berarti A is superior good stuff.

4. Elasticity Production
Is the elasticity measures the sensitivity of changes in the production of goods related to
changes in the inputs used to produce goods (Wantara, 1995). Production inputs include (1) labor
(TK), (2) land (T), (3) capital (M), and entrepreneurship (E).
In the long run, the four inputs can affect the output (product) interactively, but in the short
term analysis focuses on the interaction of labor and capital inputs assuming a capital input has
been given (denoted by M).
The relationship between total output (total product = TP), the average product (average
product = AP), and the marginal product (marginal product = MP) are presented in the following
figure.

Based on the curve above it can be concluded that:

1. on the TP curve, OB line has the greatest slope (Fig 7) so that the curve AP will reach a
maximum point (Fig 8). Point B is an optimum point TP curve
 2. at the time of the TP curve reaches a maximum (Fig 7), the marginal product is equal to
zero (Fig 8)
3. when associated with the production elasticity:
a. for0 < 𝑇𝐾 < 𝑇𝐾1 , 𝜂 > 1 because the MP is above AP
b. for 𝑇𝐾 = 𝑇𝐾1 , 𝜂 = 1 For MP = AP (MP to cut AP)
c. for, because the MP is under AP𝑇𝐾1 < 𝑇𝐾 < 𝑇𝐾2 , 0 < 𝜂 < 1
d. for 𝑇𝐾 = 𝑇𝐾2 , 𝜂 = 0 For MP = 0, and
e. to cause MP <0.𝑇𝐾 > 𝑇𝐾2 , 𝜂 < 0

The elasticity of production can be formulated as

𝑑𝑇𝑃
𝜂𝑃 = 𝑑𝑇𝐾
𝑇𝑃
𝑇𝐾
Or
𝑑𝑇𝑃 𝑇𝐾
𝜂𝑃 = .
𝑑𝑇𝐾 𝑇𝑃

Example:

Short-term production function is expressed Determine the elasticity of production if

2
manufacturers use the input TK = 10. 𝑇𝑃 = − 3 𝑇𝐾 3 + 4𝑇𝐾 2 .

Answer:
2 800
*) TK = 10, then the TP = 𝑇𝑃 = − 3 𝑇𝐾 3 + 4𝑇𝐾 2 . − 3
𝑑𝑇𝑃 𝑑𝑇𝑃
**) 𝑑𝑇𝐾 = −2 𝑇𝐾 2 + 8𝑇𝐾, For TK = 10, then𝑑𝑇𝐾 = −120

From *) and **) it is obtained 𝜂𝑃 = 4,5

That is, when the input TK plus 100% then the resulting output will increase 450%.
Types of Elasticity of Demand:
1. in Elastic Perfect (E = 0)
In perfectly elastic demand occurs when price changes that occurred had no effect on the number
of requests. E = 0, meaning that there is absolutely no change in its influence on the number of
requests. Example: drugs at the time of illness.

In perfect elasticity curve, the curve will be parallel to the axis Y or P

2. in Elastic (E < 1)
Demand in elastic happens if the price changes less influence on changes in demand. E <1,
meaning that only price changes followed by changes in the amount requested in a
relatively smaller amount.
Example: the demand for rice.

3. Unitary elastic (E = 1)
Unitary elastic demand occurs when demand changes in proportion to changes in price. E
= 1, meaning that changes in prices followed by changes in demand for the same amount.
Example: electronic goods.
 4. Elastic (E > 1)
Elastic demand occurs when a change request is greater than the change in price. E> 1,
meaning that changes in prices followed by the number of requests in a larger amount.
Examples: luxury goods.

5. Perfect elasticity (𝐸 = ~)
Perfectly elastic demand occurs when a change request is not influenced at all price
changes. The curve will be parallel to the axis Q or, meaning that price changes are not
caused by the fluctuation in the number of requests.𝑋. 𝐸 = ~
Example: herbs.

2). Elasticity of Supply

Supply elasticity is the rate of changes in supply of goods and services resulting from the
change in prices of goods and services.
To measure the size / size of the rate of change is measured by numbers called supply
elasticity coefficient with the symbol ES (Elasticity Supply).
Elasticity of Supply can be formulated as:
% changes in the number of items offered
ES =
% changes in the price of goods
Specifically can be converted into the following equation
Δ𝑄𝑠
1/2(𝑄𝑠1 + 𝑄𝑠2)
𝐸𝑆 =
Δ𝑃
1/2(𝑃1 + 𝑃2)
Types of Elasticity of Supply
1. In Perfectly Elastic (E = 0)
Offers in perfectly elastic occurs when price changes that occurred had no effect on the
number of deals.

Curve parallel to the axis Y or P

2. Inelastic (E <1)
Offers in elastic happens if the price changes less influence on changes in supply.

3. Unitary elastic (E = 1)
Offer unitary elastic happens if the price changes proportional to changes in the number
of deals.
4. Elastic (E > 1)
Elastic deals happen if changes in prices followed by a number of larger deals.

5. Perfectly elastic (𝐸 = ~)
Offer perfectly elastic happen if changes in supply is not affected at all by changes in
prices, so that the supply curve will be parallel to the axis Q or X.
 REFERENCES

Rachmani, Nuriana. 2017. Economical Mathematics Teaching Materials. Semarang

Khairil, Muhammad. Elastisitas Permintaan dan Penawaran. Quoted on March 27, 2019 from
Quipper: http://www.quipper.com/id/blog/mapel/ekonomi/pengertian-elastisitas-permintaan-dan-
penawaran/

Ferdiansyah, Azhari. Elastisitas Permintaan Dan Penawaran. Quoted on March 27, 2019 from
http://basicekonomi.blogspot.com/2013/05/elastisitas-permintaan-dan-penawaran.html?m=1

Rohman, Nur. Rumus Elastisitas Permintaan dan Penawaran dan Contoh Soalnya. Quoted on
March 27, 2019 from https://akuntanonline.com/rumus-elastisitas-permintaan-dan-penawaran/