1 / 15

Elasticity

Elasticity . Economics 2327. D. P. A. 3. B. 2. Q. 5. 7. 2/1 = 2 2/100 = .02 20/1 = 20. Price Elasticity of demand. percentage change in quantity demanded. =. percentage change in price. usually drop the minus sign. Arch Elasticity Formula.

phila
Download Presentation

Elasticity

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Elasticity Economics 2327

  2. D P A 3 B 2 Q 5 7 2/1 = 2 2/100 = .02 20/1 = 20

  3. Price Elasticity of demand percentage change in quantity demanded = percentage change in price usually drop the minus sign

  4. Arch Elasticity Formula

  5. %  Q >%  P (which meansElasticity > 1): “elastic” %  Q <%  P (which meansElasticity < 1): “inelastic” %  Q =%  P (which meansElasticity = 1): “unit elastic”

  6. Price falls from $1.05 to .95 causing quantity to increase from 45 to 55. %  Q = 10/50 = 20% %  P = 10/100 = 10% ED = 20%/10% = 2 (“elastic”) Price falls from $1.05 to .95 causing quantity to increase from 45 to 49. %  Q = 4/47 = 8% %  P = 10/100 = 10% ED = 8%/10% = .8 (“inelastic”)

  7. Previous total expenditure = P0 x Q0 New total expenditure: .9P0 x 1.2Q0 = (.9 x 1.2)(P0Q0) = 1.08 P0Q0 OR .9P0 x 1.05Q0 = (.9 x 1.05)(P0Q0) = .945 P0Q0

  8. Previous total expenditure = P0 x Q0 New total expenditure: .9P0 x 1.2Q0 = (.9 x 1.2)(P0Q0) = 1.08 P0Q0 “elas” OR .9P0 x 1.05Q0 = (.9 x 1.05)(P0Q0) = .945 P0Q0 “inelas”

  9. E= (2/5) / (2/9) = 40% / 22% = 1.8 P A 10 B 8 C 5 D 3 Q 9 11 4 6

  10. P A 10 B 8 E= (2/10) / (2/4) = .4 C 5 D 3 Q 9 11 4 6

  11. E= (2/5) / (2/9) = 40% / 22% = 1.8 P A 10 B 8 E= (2/10) / (2/4) = .4 C 5 D 3 Q 9 11 4 6

  12. P E= 1 Q

  13. P E= 1 Q gray area marks biggest rectangle (max total revenue)

  14. P E > 1 E= 1 E < 1 Q Total Exp Q

  15. Elasticity Video

More Related