Constant review of supply and demand can detect changes in the general direction of these concepts under the influence of factors such as price.It is these studies and allowed to formulate the basic economic law - supply and demand.To specify the effect of the price or any other factors became necessary to create a universal quantitative indicator (coefficient of elasticity of supply), which would have compared the growth rates to decline in demand for the product.This term would give the answer to the question - this reduction will occur rapidly or slowly, strongly or weakly.
In economic theory, the coefficient of elasticity came late, but developed quite rapidly.Flexibility in the overall concept to the economy came from the natural sciences, and for the first time this term was applied scientists of the 17th century, Robert Boyle in the study of gases and their properties.In economic literature, the term "flexibility" was introduced in the 19th century A. Marshall from the UK, followed by the development of the theory J. Hicks (also from the UK) and P. Samuelson from the US.
itself, the term "elastic" is responsible for the proportion of response of one variable depending on changes in the other, but having a certain relationship with the first magnitude.
Applying this figure to the various economic processes, it may be noted that there are many ways of illustrating the responsiveness of one economic variable to certain other changes.However, the most appropriate choice can be regarded as a unified unit - using the method of measurement as a percentage.
In quantitative terms, the elasticity is calculated using the coefficient of elasticity.
Thus, the coefficient of elasticity is a measure numerically, which shows the percentage change in one variable as a result of changes in the other one percent.The boundaries of this indicator - from zero to infinity.
With the introduction of flexibility in the economic analysis were additional features, namely:
- elasticity coefficient is a statistical tool that has long been used in marketing research;
- elasticity allows, in addition, that measure one or other economic process, but also to explain the outcome.
In today's economy there is no sphere of activity where it would be impossible to use a coefficient of elasticity.For example, the theory of economic cycles, the analysis of supply and demand, economic expectations, etc.
As a general definition of elasticity adopted the expression represented by dividing the relative increase in function to the relative increment of the independent variable.
There is another kind of considered indicators - arc elasticity, which is the estimated level of demand or supply of the reaction to the corresponding changes in income, prices and other factors.
Arc elasticity can be determined as an average elasticity or elasticity which is in the middle of the chord that connects two points.In fact, the consideration taken into account the average values of economic indicators such as price, demand, supply.
Arc elasticity is considered in the presence of relatively large changes in prices or income.The coefficient of elasticity of the arc, allegedly D. Rubinfeld and R.Pindayka always located between the two measures for the normal elasticity of the high and low prices.
other words - in the case of minor changes to the estimated values calculated point or regular elasticity, and at large - arc elasticity.
