Graphs are really important for showing how prices affect demand and supply in microeconomics. Let's break it down.

1. Elasticity of Demand

• What It Means: Price elasticity of demand looks at how much the amount of a product people want changes when the price changes. You can find it using this formula:

  $\text{Price Elasticity of Demand (PED)} = \frac{\%\text{ Change in Quantity Demanded}}{\%\text{ Change in Price}}$

• How It Looks on a Graph: Demand curves can be steep or flat. A steep curve means people still buy the product even if prices go up (this is called inelastic, like for necessities such as bread). A flat curve means people buy a lot more or a lot less depending on the price (this is called elastic, like for luxury items). For example, if a product's price goes up by 10% and people only buy 2% less, the PED = -0.2, which shows inelastic demand.

2. Elasticity of Supply

• What It Means: Price elasticity of supply looks at how much the amount of a product supplied changes when the price changes. You can find it using this formula:

  $\text{Price Elasticity of Supply (PES)} = \frac{\%\text{ Change in Quantity Supplied}}{\%\text{ Change in Price}}$

• How It Looks on a Graph: Supply curves can also be steep or flat. For example, if the price of a product goes up by 20% and the amount supplied only goes up by 10%, the PES = 0.5, showing inelastic supply.

3. Conclusion

Graphs are super helpful because they clearly show how demand and supply react to price changes. This makes it easier to understand how the economy works and helps people make better decisions.