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- 1. Elasticity
- 2. Price elasticity of demand(the mid-point method)Elasticity
- 3. Price elasticity of demandProportionate (or %) ∆QDProportionate (or %) ∆P
- 4. ÷Price elasticity of demandProportionate (or %) ∆QDProportionate (or %) ∆P∆QDQD∆PP
- 5. ÷Price elasticity of demandProportionate (or %) ∆QDProportionate (or %) ∆P∆QDQD∆PP÷∆QDmid QD∆Pmid P
- 6. Price (£)QuantityPrice elasticity of demand1210864200 10 20 30 40 50 60 70DPrice Quantity12 010 108 206 304 402 500 60
- 7. Price (£)Quantity1210864200 10 20 30 40 50 60 70DPrice Quantity12 010 108 206 304 402 500 60abPrice elasticity of demand
- 8. Price (£)Quantity1210864200 10 20 30 40 50 60 70DPrice Quantity12 010 108 206 304 402 500 60abMid P = 9∆P = −2Mid QD = 15∆QD = 10Price elasticity of demand
- 9. Price (£)Quantity1210864200 10 20 30 40 50 60 70DabMid P = 9Mid QD = 15∆P = −2∆QD = 10εd = ÷∆QDmid QD∆Pmid Pεd = ÷1015−29εd = −3 (elastic)Price elasticity of demand
- 10. Price (£)Quantity1210864200 10 20 30 40 50 60 70DabMid QD = 45∆QD = 10∆P = −2Mid P = 3Price Quantity12 010 108 206 304 402 500 60Price elasticity of demand
- 11. Price (£)Quantity1210864200 10 20 30 40 50 60 70DabMid QD = 45∆QD = 10εd = ÷∆QDmid QD∆Pmid Pεd = ÷1045−23εd = −1/3 (inelastic)∆P = −2Mid P = 3Price elasticity of demand
- 12. Price (£)Quantity1210864200 10 20 30 40 50 60 70DabMid QD = 30∆QD = 20∆P = −4Price Quantity12 010 108 206 304 402 500 60Mid P = 6cPrice elasticity of demand
- 13. Price (£)Quantity1210864200 10 20 30 40 50 60 70DabMid QD = 30∆QD = 20∆P = −4Mid P = 6cεd = ÷∆QDmid QD∆Pmid Pεd = ÷2030−46εd = −1 (unit elastic)Price elasticity of demand
- 14. Demand andConsumer ExpenditureElasticity
- 15. Price (£)QuantityDemand and Consumer Expenditure60504030201000 10 20 30 40 50 60 70D1
- 16. aPrice (£)Quantity60504030201000 10 20 30 40 50 60 70£30 x 20£30 x 20= £600= £600Demand and Consumer ExpenditureD1
- 17. baPrice (£)Quantity60504030£20 x 60 = £1,200£20 x 60 = £1,200201000 10 20 30 40 50 60 70Demand and Consumer ExpenditureD1
- 18. Price (£)Quantity60504030201000 10 20 30 40 50 60 70£30 x 20£30 x 20= £600= £600D2Demand and Consumer ExpenditureD1a
- 19. cPrice (£)Quantity60504030201000 10£10 x 30 = £300£10 x 30 = £30020 30 40 50 60 70D2Demand and Consumer ExpenditureD1a
- 20. Curves with variouselasticitiesElasticity
- 21. Totally inelastic demand (Totally inelastic demand (PP∈∈DD = 0)= 0)PQO Q1P1Da
- 22. PQO Q1P1P2DbaTotally inelastic demand (Totally inelastic demand (PP∈∈DD = 0)= 0)
- 23. Infinitely elastic demand (Infinitely elastic demand (PP∈∈DD == ∞∞))PQO Q1P1 Da
- 24. PQO Q1P1Q2DbaInfinitely elastic demand (Infinitely elastic demand (PP∈∈DD == ∞∞))
- 25. Unit elastic demand (Unit elastic demand (PP∈∈DD = -1)= -1)PQO 4020Da
- 26. PQO 4020100D8abUnit elastic demand (Unit elastic demand (PP∈∈DD = -1)= -1)As price changes, totalconsumer expenditure(i.e. firms’ revenue)remains the same.
- 27. Different elasticities along different portions of a demand curveDifferent elasticities along different portions of a demand curvePQOP1Q1aD
- 28. Different elasticities along different portions of a demand curveDifferent elasticities along different portions of a demand curvePQOP1P2Q1 Q2abDElasticdemand
- 29. Different elasticities along different portions of a demand curveDifferent elasticities along different portions of a demand curvePQOP1P2P3Q1 Q2Q3abcDInelasticdemand
- 30. Measuring elasticityby the point methodElasticity
- 31. Measuring elasticity at a pointMeasuring elasticity at a pointPQ0DrPεd = (1 / slope) x P/Q
- 32. PQ50300 40 100DrPεd = (1 / slope) x P/QMeasuring elasticity at a pointMeasuring elasticity at a point
- 33. PQ50300 40 100DrPεd = (1 / slope) x P/Q= −100/50 x 30/40Measuring elasticity at a pointMeasuring elasticity at a point
- 34. PQ50300 40 100DrPεd = (1 / slope) x P/Q= −100/50 x 30/40= −60/40Measuring elasticity at a pointMeasuring elasticity at a point
- 35. PQ50300 40 100DrPεd = (1 / slope) x P/Q= −100/50 x 30/40= −60/40= −1.5Measuring elasticity at a pointMeasuring elasticity at a point
- 36. Different elasticities along a straight-line demand curveDifferent elasticities along a straight-line demand curvePQDemand02468100 10 20 30 40 50nmlkPεd = (1 / slope) x P/Q
- 37. Different elasticities along a straight-line demand curveDifferent elasticities along a straight-line demand curvePQDemand02468100 10 20 30 40 50nmlkPεd = (1 / slope) x P/Q(1 / slope) is constant= −50/10 = −5
- 38. Different elasticities along a straight-line demand curveDifferent elasticities along a straight-line demand curvePQDemand02468100 10 20 30 40 50nmlkPεd = (1 / slope) x P/Q(1 / slope) is constant= −50/10 = −5But P/Q varies:at n, P/Q = 8/10
- 39. Different elasticities along a straight-line demand curveDifferent elasticities along a straight-line demand curvePQDemand02468100 10 20 30 40 50nmlkPεd = (1 / slope) x P/Q(1 / slope) is constant= −50/10 = −5But P/Q varies:at n, P/Q = 8/10at m, P/Q = 6/20at l, P/Q = 4/30
- 40. Price elasticity of supplyElasticity
- 41. Proportionate (or %) ∆QDProportionate (or %) ∆PThe mid-point formula formeasuring price elasticity of supply
- 42. ÷Proportionate (or %) ∆QDProportionate (or %) ∆P∆QDQD∆PPThe mid-point formula formeasuring price elasticity of supply
- 43. ÷Proportionate (or %) ∆QDProportionate (or %) ∆P∆QDQD∆PP÷∆QDmid QD∆Pmid PThe mid-point formula formeasuring price elasticity of supply
- 44. Supply curves with different price elasticity of supplySupply curves with different price elasticity of supplyPQOP0Q0S1
- 45. Supply curves with different price elasticity of supplySupply curves with different price elasticity of supplyPQOP0Q0S2S1
- 46. Supply curves with different price elasticity of supplySupply curves with different price elasticity of supplyPQOP1P0Q0Q1S2S1
- 47. Supply curves with different price elasticity of supplySupply curves with different price elasticity of supplyPQOP1Q2P0Q0Q1S2S1
- 48. Price elasticity of supplyand timeElasticity
- 49. Supply in different time periodsSupply in different time periodsD1P1Q1PQOa
- 50. D1D2P1Q1PQOaSupply in different time periodsSupply in different time periods
- 51. D1D2SiP1P2Q1PQOabSupply in different time periodsSupply in different time periods
- 52. D1D2SiSSP1P3P2Q1 Q3PQOabcSupply in different time periodsSupply in different time periods
- 53. D1D2SiSSSLP1P4P3P2Q1 Q3Q4PQOabcdSupply in different time periodsSupply in different time periods

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