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AGGREGATE SUPPLY: The total (or aggregate) real production of final goods and services available in the domestic economy at a range of price levels, during a given time period. Aggregate supply (AS) is one half of the aggregate market analysis; the other half is aggregate demand. Aggregate supply, relates the economy's price level, measured by the GDP price deflator, and aggregate domestic production, measured by real gross domestic product. The aggregate supply relation is generally separated into long-run aggregate supply, in which all prices and wages and flexible and all markets are in equilibrium, and short-run aggregate supply, in which some prices and wage are NOT flexible and some markets are NOT in equilibrium.
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                           POINT ELASTICITY: The relative responsiveness of a change in one variable (call it B) to an infinitesimally small change in another variable (call it A). The notion of point elasticity typically comes into play when discussing the elasticity at a specific point on a curve. Point elasticity can be calculated in a number of different ways. Sophisticated economists, using sophisticated mathematical techniques (better known as calculus) calculate point elasticity by using derivatives. Derivatives are calculus talk for infinitesimally small changes. The formula for calculating point elasticity using calculus is given as:The symbol that looks like a backward six (∂) is the mathematical notation for a derivative, or infinitesimally small change. The first term on the right-hand side of this formula is the percentage change in variable B and the second term is the percentage change in variable A.Unsophisticated folks can also calculate point elasticity without the use of sophisticated calculus. This is done with the midpoint elasticity formula, presented here: midpoint
elasticity | = | (B2 - B1)
(B2 + B1)/2 | ÷ | (A2 - A1)
(A2 + A1)/2 |
The first term on the right-hand side of the equation is the percentage change in variable B. The second term is the percentage change in variable A. The individual items are interpreted as this: A1 is the initial value of A before any changes, A2 is the ending value after A changes, B1 is the initial value of B before any changes, and B2 is the ending value after B changes.This midpoint elasticity formula actually calculates the average or arc elasticity of the entire line segment. However, it also calculates the point elasticity for the midpoint of a line segment.
Recommended Citation:POINT ELASTICITY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: April 29, 2024].
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