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My elasticity
- 8. Figure 1: Extreme Cases of Demand D (b) D Perfectly Inelastic Demand (a) Quantity Price per Unit 1 2 3 4 20 40 60 80 100 Quantity 20 40 60 80 100 1 2 3 4 Price per Unit Perfectly Elastic Demand
- 9. Figure 2: Relationship between demand slope and elasticity Quantity PRICE Perfectly elastic Perfectly inelastic Relatively Inelastic Demand Relatively Elastic Demand
- 14. When does it pay to raise the price? SUPPOSE DEMAND IS INELASTIC SO THAT THE % CHANGE IN QUANTITY IS SMALLER THAN THE % CHANGE IN PRICE LOSS GAIN
- 15. Figure 4 Effects of Price Changes on Expenditure
- 17. 1 2 3 D Quantity Price and since equal quantity decreases (horizontal arrows) are larger and larger percentage decreases . . . Since equal peso increases (vertical arrows) are smaller and smaller percentage increases . . . demand becomes more and more elastic as we move leftward and upward along a straight-line demand curve.
- 18. PRICE QUANTITY As P increases, Q falls, elasticity gets bigger | E D | > 1 elastic | E D | = 1 Unit elastic | E D | < 1 inelastic 25 5
- 19. Small Summary Inelastic Demand Unitary Elastic Demand Elastic Demand Definition |E D | <1 |E D | =1 |E D | >1 Total Revenue Same direction as price change Does not change with price change Opposite direction from price Straight Line Demand Curve Lower segment Middle point Upper segment
- 25. Figure 6 Some Short-Run Price Elasticities of Demand inelastic elastic
- 30. Figure 9 Some Income Elasticities Luxury (>1), Necessity (0<E Y <1), Normal (>0) and Inferior (<0) Goods defined by Income elasticties
- 32. Figure 10 Some Cross-Price Elasticities Complements (-) vs Substitutes (+) defined by sign of cross price elasticity
- 36. : Extreme Cases of Supply S P 1 P 2 S (a) Quantity per Period Price per Unit (b) Quantity per Period Price per Unit Perfectly Inelastic Supply Perfectly Elastic Supply
Hinweis der Redaktion
- Tells us percentage change in quantity demanded for each 1% increase in price
- Ask student to draw the graph for extreme case.
- Do not consider the cost side, only the income earned for firms
- Graphically, at any point on a demand curve sellersâ total revenue (buyersâ total expenditure) is the area of a rectangle . Width equal to quantity demanded .Height equal to price
- Another equation is helpful to understand the concept: (dq/dp ) * (p/q)
- Example: pepsi and cola
- Example: corn in Iowa compared with corn in US Example: Pepsi compared with soda drink
- Example: salt, milk, eggs, gas, medical care and so on â necessity diamond, tourism to China and so on â luxurious
- Necessity is not meaning ânecessary to surviveâ. Cigarette is an example. It is inelastic demanded.
- While the sign of the cross-price elasticity helps us distinguish