Elasticity Function

point position

1.5

settings

shape

0.9

point

0.03

elasticity

tangent

average

point elasticity value

elasticity =

0.46

local max

local min

special case

This Demonstration considers elasticity, which is one of the central concepts in theoretical and empirical economics. Elasticity is indispensable because it shows relative (per cent) change of a given variable due to relative (per cent) change in another variable. We use a smooth non-negative function

f(x)

to demonstrate some useful properties of elasticity analysis. Visualization of different ratios, which are usually treated analytically, can be instructive for better understanding of elasticity and related economic concepts—for example, elasticity of demand function.

Change the "shape" slider to vary

f(x)

. The "special case" button returns the point where slopes of average and tangent curves are equal, so elasticity is effectively equal to one. Switch the checkboxes on and off to better study the interplay between functions.