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18 October – IB Economics

18 October – IB Economics. Review Go over Student Workpoint 4.1 (p. 48) Examine changes in PED along a straight line Identify determinants of PED Survey classmates to determine PED * Portfolio check on 7 November (formally assessed) What factors determine PED?. Student Workpoint 4.1.

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18 October – IB Economics

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  1. 18 October – IB Economics • Review • Go over Student Workpoint 4.1 (p. 48) • Examine changes in PED along a straight line • Identify determinants of PED • Survey classmates to determine PED * Portfolio check on 7 November (formally assessed) What factors determine PED?

  2. Student Workpoint 4.1 • (4-3.60) / 4 = 10% (630-600) / 600 = 5% • PED = 5%/10% = 0.5 • Before the price change: $4 x 600 = $2,400 After the price change: $3.60 x 630 = $2,268 • See diagram • No, it wasn’t a sensible idea. The firm lost $132 in revenue by lowering the price. Because demand for this product is relatively inelastic, lowering the price did not lead to a large increase in demand for the product.

  3. Price Elasticity of Demand (PED) Syllabus Items 18 • Calculate PED between two designated points on a demand curve using the PED equation above. • Explain why PED varies along a straight line demand curve and is not represented by the slope of the demand curve. PED= percentage change in quantity demanded divided by percentage change in price

  4. Elasticity along a straight line

  5. Determinants of PED • Substitutes available • Necessity of product • How widely the produce is defined • Time period

  6. How Much is Spent on Halloween? • Halloween is one category that is bouncing back quickly from the recession. • “According to the National Retail Federation, a record 170 million Americans will spend close to 8 billion US dollars (about 6,000,000,000 Euro) on candy, pumpkins, decorations and costumes – both for them and their pets.” • The average American will spend 79.83 US dollars (61.71 Euro). Source: Time Magazine (2012)

  7. Is the demand for Halloween candy elastic or inelastic?

  8. Before Halloween… Source: http://kyleodonnell.wordpress.com/2012/10/14/halloween-candy-and-its-effects-on-the-elasticity-of-supply-demand-and-waistbands/

  9. After Halloween… Source: http://kyleodonnell.wordpress.com/2012/10/14/halloween-candy-and-its-effects-on-the-elasticity-of-supply-demand-and-waistbands/

  10. Elasticity Survey Groups – Ask at least 12 classmates • #1 Nela, Hans Wolf, Johannes • #2 Min-Seok, Kuan-Lin, Gokhan • #3 Arthur, Jara, Tanner, • #4 Matheus, Kazuyasu, Min-Woo • #5 Marie, Saya, Oleksandr, Natalie • #6 Anna Lisa, Shunzo, Ellen • #7 Junyang, Vitaly, Momoko, Owen • #8 Jacqueline, Sebastian, Matej

  11. Share Your Results in New Groups • #1 Nela (A), Hans Wolf (C), Johannes (E) • #2 Min-Seok (A), Kuan-Lin (C), Gokhan (E) • #3 Arthur (A), Jara (C), Tanner (E) • #4 Matheus (A), Kazuyasu (C), Min-Woo (E) • #5 Marie (B), Saya (D), Oleksandr (D), Natalie (F) • #6 Anna Lisa (B), Shunzo (D), Ellen (F) • #7 Junyang (B), Vitaly (D), Momoko (D), Owen (F) • #8 Jacqueline (B), Sebastian (D), Matej (F)

  12. Syllabus http://ibeconomics-isd.weebly.com/

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