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Respond to the question: Elasticity?

04/30/2001 03:21 PM by Rodrigo; Elasticity

Elasticity refers to the sensitiveness of the percentage variation of one variable with respect to percentage variation of another. For instance, let:
Y=f(X)
When X changes from X* to X**, Y varies from Y*=f(X*) to Y**=f(X**). The percentage variation of X is the ratio:
dX/X=(X**-X*)/X*
The percentage of Y is the ratio:
dY/Y=(Y**-Y*)/Y*
The elasticity is defined as:
E=[dY/Y]/[dX/X]
or, alternatively:
E=(dY/dX)(X/Y)
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