Elasticity 1
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This document defines elasticity as the percentage change in one variable due to a 1% change in another variable. It discusses price elasticity of demand, which is the responsiveness of quantity demanded to a change in price. Perfectly elastic, relatively elastic, unitary, relatively inelastic, and perfectly inelastic demands are defined based on the elasticity value. Point and arc elasticities are introduced as ways to measure elasticity. Determinants of price elasticity like availability of substitutes and necessities vs luxuries are outlined. Income elasticity and cross elasticity are also defined. An example of calculating price elasticity using a demand equation is provided.
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Elasticity
Elasticity refers to the responsiveness of one economic variable to changes in another. There are several types of elasticity:
- Price elasticity of demand measures the responsiveness of demand to price changes. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
- Income elasticity of demand measures responsiveness of demand to changes in income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
- Price elasticity of supply measures responsiveness of supply to price changes. It is calculated as the percentage change in quantity supplied divided by the percentage change in price.
Elasticity
The document discusses the concept of elasticity in economics. It defines elasticity as measuring how responsive the quantity demanded or supplied of a good is to changes in its price. There are different types of elasticity measures, including price elasticity of demand, which measures how much quantity demanded responds to a 1% change in price. Elasticity can be calculated at a single point on a demand or supply curve (point elasticity) or over an arc or section of the curve (arc elasticity).
Measurment of elasticity of demand
This document discusses the measurement of elasticity, including:
1. Defining elasticity of demand as the responsiveness of quantity demanded to changes in price or other factors.
2. Describing the three main types of elasticity - price elasticity, income elasticity, and cross elasticity.
3. Explaining the different categories of price elasticity, from perfectly elastic to perfectly inelastic demand, and providing examples of goods that fall under each category.
Elasticity of demand
Price Elasticity of Demand, Degrees of Elasticity, Factors determining Elasticity of Demand, Measurement of Price Elasticity, Importance of Elasticity of Demand
Elasticity Part (2)
This document discusses key concepts of elasticity including:
1) It defines income elasticity of demand as measuring the responsiveness of demand to changes in income. It can be positive or negative depending on the good.
2) It provides rules and formulas for calculating income elasticity using point and midpoint methods. Examples are given to demonstrate calculations and determine good types.
3) It defines cross elasticity of demand as measuring responsiveness of demand for one good to price changes of another. It can be positive, negative, or zero depending on the goods' relationship.
4) Formulas and examples are given for calculating and interpreting cross elasticity.
5) Price elasticity of supply is defined
Elasticity Part (1)
Here are the answers to the questions:
1) Using the formula: E = (% change in QD) / (% change in P)
At point A:
% change in QD = (100 - 80)/100 = 20%
% change in P = (60 - 40)/40 = 50%
E = -20/50 = -0.4
2) The elasticity value is between 0 and -1, meaning the demand is inelastic.
3) The demand curve would be downward sloping and relatively steep, indicating inelastic demand.
Q.DXPXpointElasticityShape of demand curve
10040A-0.4InelasticSteep
Price Elasticity of Demand
The document discusses various microeconomics concepts including:
1) Elasticity of demand and the importance of understanding the determinants and measurements of price elasticity and cross price elasticity.
2) Peak and off-peak demand, and how utilities charge higher prices during peak periods to balance supply and demand.
3) Examples are provided to illustrate calculations of price elasticity, cross price elasticity, and using elasticities to predict changes in demand.
4) Income elasticity is also discussed including definitions of normal goods, luxury goods, necessities, and inferior and counter-cyclical products.
QII - SS4 - LT1 reviewer
This document provides a summary of key concepts relating to elasticity, including definitions of price elasticity of demand, income elasticity of demand, cross-price elasticity of demand, and price elasticity of supply. It discusses factors that determine elasticity such as type of good, availability of substitutes, and time frame. The document also explains tax incidence and how the burden of a tax is related to the elasticity of supply and demand, with the group with the more inelastic curve shouldering more of the tax burden.
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Elasticity
Elasticity refers to the responsiveness of one economic variable to changes in another. There are several types of elasticity:
- Price elasticity of demand measures the responsiveness of demand to price changes. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
- Income elasticity of demand measures responsiveness of demand to changes in income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
- Price elasticity of supply measures responsiveness of supply to price changes. It is calculated as the percentage change in quantity supplied divided by the percentage change in price.
Elasticity
The document discusses the concept of elasticity in economics. It defines elasticity as measuring how responsive the quantity demanded or supplied of a good is to changes in its price. There are different types of elasticity measures, including price elasticity of demand, which measures how much quantity demanded responds to a 1% change in price. Elasticity can be calculated at a single point on a demand or supply curve (point elasticity) or over an arc or section of the curve (arc elasticity).
Measurment of elasticity of demand
This document discusses the measurement of elasticity, including:
1. Defining elasticity of demand as the responsiveness of quantity demanded to changes in price or other factors.
2. Describing the three main types of elasticity - price elasticity, income elasticity, and cross elasticity.
3. Explaining the different categories of price elasticity, from perfectly elastic to perfectly inelastic demand, and providing examples of goods that fall under each category.
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Elasticity Part (2)
This document discusses key concepts of elasticity including:
1) It defines income elasticity of demand as measuring the responsiveness of demand to changes in income. It can be positive or negative depending on the good.
2) It provides rules and formulas for calculating income elasticity using point and midpoint methods. Examples are given to demonstrate calculations and determine good types.
3) It defines cross elasticity of demand as measuring responsiveness of demand for one good to price changes of another. It can be positive, negative, or zero depending on the goods' relationship.
4) Formulas and examples are given for calculating and interpreting cross elasticity.
5) Price elasticity of supply is defined
Elasticity Part (1)
Here are the answers to the questions:
1) Using the formula: E = (% change in QD) / (% change in P)
At point A:
% change in QD = (100 - 80)/100 = 20%
% change in P = (60 - 40)/40 = 50%
E = -20/50 = -0.4
2) The elasticity value is between 0 and -1, meaning the demand is inelastic.
3) The demand curve would be downward sloping and relatively steep, indicating inelastic demand.
Q.DXPXpointElasticityShape of demand curve
10040A-0.4InelasticSteep
Price Elasticity of Demand
The document discusses various microeconomics concepts including:
1) Elasticity of demand and the importance of understanding the determinants and measurements of price elasticity and cross price elasticity.
2) Peak and off-peak demand, and how utilities charge higher prices during peak periods to balance supply and demand.
3) Examples are provided to illustrate calculations of price elasticity, cross price elasticity, and using elasticities to predict changes in demand.
4) Income elasticity is also discussed including definitions of normal goods, luxury goods, necessities, and inferior and counter-cyclical products.
QII - SS4 - LT1 reviewer
This document provides a summary of key concepts relating to elasticity, including definitions of price elasticity of demand, income elasticity of demand, cross-price elasticity of demand, and price elasticity of supply. It discusses factors that determine elasticity such as type of good, availability of substitutes, and time frame. The document also explains tax incidence and how the burden of a tax is related to the elasticity of supply and demand, with the group with the more inelastic curve shouldering more of the tax burden.
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Elasticity of demand measures the responsiveness of quantity demanded to changes in factors like price, income, and advertising. There are different types of elasticity - price elasticity measures response to price changes, income elasticity to income changes, cross elasticity to substitute good prices, and promotional elasticity to advertising changes. Elasticities can be perfectly inelastic (no response), unitary (proportionate response), relatively elastic or inelastic (more or less than proportionate response). The document discusses the measurement and importance of different elasticities at micro and macro levels.
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The document discusses concepts related to revenue, elasticity, and demand curves. It provides equations for total revenue, marginal revenue, demand, and their relationships. It defines different types of elasticity including price, income, and cross-price elasticity. It discusses how elasticity can be used to determine optimal pricing and growth strategies.
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The document discusses supply, including the supply function, law of supply, supply schedules, supply curves, individual and market supply curves, movements along the supply curve, and elasticity of supply. It defines key supply concepts and relationships, such as how supply is determined by price and other factors, and how the supply curve slopes upward. It also explains how elasticity of supply is measured and what different elasticity values indicate about the responsiveness of supply to price changes.
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Elasticity of Supply
The elasticity of supply can be defined as “the degree (measure) of responsiveness in quantity supplied to a change in price”.
It is also defined as the percentage change in quantity supplied divided by percentage change in price.
It represents the rate of change in quantity supplied due to a change in its own price.
Elasticity of supply can be defined as “the degree (measure) of responsiveness in quantity supplied to a change in price”.
It is also defined as the percentage change in quantity supplied divided by percentage change in price.
It represents the rate of change in quantity supplied due to a change in it’s own price.
Price elasticity of demand
Price elasticity of demand measures how responsive the quantity demanded of a product is to changes in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. Demand is elastic if the elasticity is greater than 1, meaning quantity responds more than proportionally to price changes. Demand is inelastic if elasticity is less than 1, meaning quantity does not change much with price changes. When demand is inelastic, increases in price can raise total revenue, while elastic demand means decreases in price may raise total revenue.
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Here are some ways the concept of price elasticity can be used in business decisions:
1. Maruti Udyog - If cross price elasticity of demand between Zen and Alto is high (i.e. they are close substitutes), then a price decrease for one model can help boost its sales by diverting demand from the other. This information helps in pricing strategies.
2. HP - Since laptops and printers are complements, a price decrease in one will lead to an increase in demand for both by virtue of complementarity. So bundle pricing or discounts on both can boost revenues.
3. Diamond factory - Since supply of skilled labor is fixed in short run, elasticity of supply of labor is low
Elasticity
1. Elasticity measures the responsiveness of one variable, such as demand or supply, to changes in another variable, such as price or income.
2. There are four main types of elasticity: price elasticity of demand, price elasticity of supply, income elasticity of demand, and cross elasticity.
3. Price elasticity of demand measures how much demand changes in response to changes in price. If demand changes more than price, it is elastic; if less than price, it is inelastic.
3. elasticity of demand and supply
1. Elasticity measures the responsiveness of quantity demanded or supplied to a change in its price. It is calculated as the percentage change in quantity divided by the percentage change in price.
2. Demand is more elastic when good substitutes are available and less elastic when substitutes are unavailable. Demand for necessities tends to be inelastic while demand for luxuries tends to be more elastic.
3. If demand is elastic, total revenue increases when price decreases as the rise in quantity sold outweighs the fall in price. If demand is inelastic, total revenue decreases with a price decrease as quantity does not rise enough.
MICRO ECONOMICS
This document provides a summary of concepts related to demand elasticity, including:
1. Price elasticity of demand is measured as the percentage change in quantity demanded divided by the percentage change in price. It can be elastic (Ep>1), unit elastic (Ep=1), or inelastic (Ep<1).
2. Cross elasticity of demand measures the responsiveness of demand for one good to changes in price of another good. It can be positive for substitutes and negative for complements.
3. Income elasticity of demand measures the responsiveness of demand to changes in income. It can be elastic (Ey>1) for luxury goods or inelastic (
Elasticityppt
This document discusses elasticity of demand, which measures the responsiveness of quantity demanded to changes in factors like price. It defines price elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price. Price elasticity can be perfectly inelastic (ep=0), unitary (ep=1), or perfectly elastic (ep=∞). Cross elasticity measures responsiveness to the price of a related good, while income elasticity measures responsiveness to changes in consumer income. Understanding elasticities helps businesses make pricing, taxation, and product differentiation decisions.
Elasticity of demand and supply
Elasticity measures the responsiveness of one variable to changes in another. Price Elasticity of Demand (PED) measures how quantity demanded responds to changes in price. PED is calculated by taking the percentage change in quantity demanded over the percentage change in price. A PED greater than 1 indicates price elastic demand, less than 1 is price inelastic, and equal to 1 is unit elastic. The magnitude and sign of PED provide information about how responsive demand is to price changes and the direction of the relationship.
Economics - Concept of Demand and Supply Elasticity
Measures the responsiveness of one variable to a certain change of another variable.
“Measures”, reported as numbers or coefficients.
“Responsiveness”, meaning reaction to change.
Thus, any change causes people to react, and elasticity measures this extent to which the people react.
Proportional measure or percentage change in the variables measures the responsiveness of consumers and producers.
Economics - Concept of Demand and Supply Elasticity
Elasticity measures the responsiveness of one variable to a certain change of another variable. “Measures”, reported as numbers or coefficients. “Responsiveness”, meaning reaction to change. Thus, any change causes people to react, and elasticity measures this extent to which the people react. Proportional measure or percentage change in the variables measures the responsiveness of consumers and producers.
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This document discusses the concept of elasticity in economics. It defines elasticity as a measure of responsiveness of one variable to another. Price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. Demand is elastic if the quantity changes more than price and inelastic if quantity changes less than price. The document provides examples of calculating elasticity between points on demand and supply curves. It also discusses how elasticity changes along straight-line curves and is influenced by the availability of substitutes.
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The document discusses the concept of elasticity in economics. It defines elasticity as a measure of how responsive one variable is to changes in another variable. Price elasticity of demand measures the responsiveness of quantity demanded to changes in price. Demand is elastic if a 1% change in price leads to a greater than 1% change in quantity demanded, and inelastic if the change in quantity is less than 1%. Factors like availability of substitutes, importance in spending, and time period impact how elastic demand is.
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PharmaKhabar is an online platform that provides entire pharma related information, news, and articles at one place.
https://www.pharmakhabar.com/
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This document discusses price elasticity of demand and supply. It defines price elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price. Price elasticity measures how responsive consumers are to price changes. Demand is more elastic when good substitutes exist, when the good is a small part of the budget, or over longer periods of time as consumers can adjust. Price elasticity of supply is defined similarly, measuring producer responsiveness to price changes. Supply becomes more elastic over longer periods as producers can adjust production. The document also discusses income elasticity of demand and cross-price elasticity.
Elastcity of demand
Elasticity is a measure of the responsiveness of one variable to another.
The greater the elasticity, the greater the responsiveness.
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Price elasticity of demand (PED) shows the relationship between price and quantity demanded and provides a precise calculation of the effect of a change in price on quantity demanded.
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The document discusses the concept of elasticity, which measures the responsiveness of one variable to another. It defines price elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price. Demand is elastic if this value is greater than 1, and inelastic if less than 1. The document also discusses determining elasticity between points on demand and supply curves, and how elasticity changes along straight-line curves and depends on the availability of substitutes and importance of the good.
Elasticity of demand
The document presents information on elasticity of demand, including definitions, types, and factors affecting elasticity. It discusses:
1. Elasticity measures the responsiveness of demand to changes in other variables like price. There are different types including price, income, and cross elasticity.
2. Price elasticity measures the responsiveness of quantity demanded to a price change. Income elasticity measures the responsiveness to an income change.
3. Elasticity can be perfectly inelastic, relatively inelastic, unitary, relatively elastic, or perfectly elastic depending on the steepness of the demand curve. Necessities typically have inelastic demand while luxuries have more elastic demand.
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Elasticity of demand measures the responsiveness of quantity demanded to changes in factors like price, income, and advertising. There are different types of elasticity - price elasticity measures response to price changes, income elasticity to income changes, cross elasticity to substitute good prices, and promotional elasticity to advertising changes. Elasticities can be perfectly inelastic (no response), unitary (proportionate response), relatively elastic or inelastic (more or less than proportionate response). The document discusses the measurement and importance of different elasticities at micro and macro levels.
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The document discusses concepts related to revenue, elasticity, and demand curves. It provides equations for total revenue, marginal revenue, demand, and their relationships. It defines different types of elasticity including price, income, and cross-price elasticity. It discusses how elasticity can be used to determine optimal pricing and growth strategies.
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The document discusses supply, including the supply function, law of supply, supply schedules, supply curves, individual and market supply curves, movements along the supply curve, and elasticity of supply. It defines key supply concepts and relationships, such as how supply is determined by price and other factors, and how the supply curve slopes upward. It also explains how elasticity of supply is measured and what different elasticity values indicate about the responsiveness of supply to price changes.
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Elasticity of Supply
The elasticity of supply can be defined as “the degree (measure) of responsiveness in quantity supplied to a change in price”.
It is also defined as the percentage change in quantity supplied divided by percentage change in price.
It represents the rate of change in quantity supplied due to a change in its own price.
Elasticity of supply can be defined as “the degree (measure) of responsiveness in quantity supplied to a change in price”.
It is also defined as the percentage change in quantity supplied divided by percentage change in price.
It represents the rate of change in quantity supplied due to a change in it’s own price.
Price elasticity of demand
Price elasticity of demand measures how responsive the quantity demanded of a product is to changes in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. Demand is elastic if the elasticity is greater than 1, meaning quantity responds more than proportionally to price changes. Demand is inelastic if elasticity is less than 1, meaning quantity does not change much with price changes. When demand is inelastic, increases in price can raise total revenue, while elastic demand means decreases in price may raise total revenue.
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Here are some ways the concept of price elasticity can be used in business decisions:
1. Maruti Udyog - If cross price elasticity of demand between Zen and Alto is high (i.e. they are close substitutes), then a price decrease for one model can help boost its sales by diverting demand from the other. This information helps in pricing strategies.
2. HP - Since laptops and printers are complements, a price decrease in one will lead to an increase in demand for both by virtue of complementarity. So bundle pricing or discounts on both can boost revenues.
3. Diamond factory - Since supply of skilled labor is fixed in short run, elasticity of supply of labor is low
Elasticity
1. Elasticity measures the responsiveness of one variable, such as demand or supply, to changes in another variable, such as price or income.
2. There are four main types of elasticity: price elasticity of demand, price elasticity of supply, income elasticity of demand, and cross elasticity.
3. Price elasticity of demand measures how much demand changes in response to changes in price. If demand changes more than price, it is elastic; if less than price, it is inelastic.
3. elasticity of demand and supply
1. Elasticity measures the responsiveness of quantity demanded or supplied to a change in its price. It is calculated as the percentage change in quantity divided by the percentage change in price.
2. Demand is more elastic when good substitutes are available and less elastic when substitutes are unavailable. Demand for necessities tends to be inelastic while demand for luxuries tends to be more elastic.
3. If demand is elastic, total revenue increases when price decreases as the rise in quantity sold outweighs the fall in price. If demand is inelastic, total revenue decreases with a price decrease as quantity does not rise enough.
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This document provides a summary of concepts related to demand elasticity, including:
1. Price elasticity of demand is measured as the percentage change in quantity demanded divided by the percentage change in price. It can be elastic (Ep>1), unit elastic (Ep=1), or inelastic (Ep<1).
2. Cross elasticity of demand measures the responsiveness of demand for one good to changes in price of another good. It can be positive for substitutes and negative for complements.
3. Income elasticity of demand measures the responsiveness of demand to changes in income. It can be elastic (Ey>1) for luxury goods or inelastic (
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This document discusses elasticity of demand, which measures the responsiveness of quantity demanded to changes in factors like price. It defines price elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price. Price elasticity can be perfectly inelastic (ep=0), unitary (ep=1), or perfectly elastic (ep=∞). Cross elasticity measures responsiveness to the price of a related good, while income elasticity measures responsiveness to changes in consumer income. Understanding elasticities helps businesses make pricing, taxation, and product differentiation decisions.
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Elasticity measures the responsiveness of one variable to changes in another. Price Elasticity of Demand (PED) measures how quantity demanded responds to changes in price. PED is calculated by taking the percentage change in quantity demanded over the percentage change in price. A PED greater than 1 indicates price elastic demand, less than 1 is price inelastic, and equal to 1 is unit elastic. The magnitude and sign of PED provide information about how responsive demand is to price changes and the direction of the relationship.
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“Measures”, reported as numbers or coefficients.
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Thus, any change causes people to react, and elasticity measures this extent to which the people react.
Proportional measure or percentage change in the variables measures the responsiveness of consumers and producers.
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Elasticity measures the responsiveness of one variable to a certain change of another variable. “Measures”, reported as numbers or coefficients. “Responsiveness”, meaning reaction to change. Thus, any change causes people to react, and elasticity measures this extent to which the people react. Proportional measure or percentage change in the variables measures the responsiveness of consumers and producers.
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PharmaKhabar is an online platform that provides entire pharma related information, news, and articles at one place.
https://www.pharmakhabar.com/
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This document discusses price elasticity of demand and supply. It defines price elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price. Price elasticity measures how responsive consumers are to price changes. Demand is more elastic when good substitutes exist, when the good is a small part of the budget, or over longer periods of time as consumers can adjust. Price elasticity of supply is defined similarly, measuring producer responsiveness to price changes. Supply becomes more elastic over longer periods as producers can adjust production. The document also discusses income elasticity of demand and cross-price elasticity.
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Elasticity is a measure of the responsiveness of one variable to another.
The greater the elasticity, the greater the responsiveness.
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Price elasticity of demand (PED) shows the relationship between price and quantity demanded and provides a precise calculation of the effect of a change in price on quantity demanded.
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The document discusses the concept of elasticity, which measures the responsiveness of one variable to another. It defines price elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price. Demand is elastic if this value is greater than 1, and inelastic if less than 1. The document also discusses determining elasticity between points on demand and supply curves, and how elasticity changes along straight-line curves and depends on the availability of substitutes and importance of the good.
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The document presents information on elasticity of demand, including definitions, types, and factors affecting elasticity. It discusses:
1. Elasticity measures the responsiveness of demand to changes in other variables like price. There are different types including price, income, and cross elasticity.
2. Price elasticity measures the responsiveness of quantity demanded to a price change. Income elasticity measures the responsiveness to an income change.
3. Elasticity can be perfectly inelastic, relatively inelastic, unitary, relatively elastic, or perfectly elastic depending on the steepness of the demand curve. Necessities typically have inelastic demand while luxuries have more elastic demand.
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Price elasticity of demand measures the responsiveness of quantity demanded to price changes. Demand is elastic if quantity changes more than price, unit elastic if quantity and price change equally, and inelastic if quantity changes less than price. Price elasticity of supply measures responsiveness of quantity supplied to price changes. Supply is elastic if quantity supplied responds greatly to price and inelastic if quantity responds little to price. Cross-price elasticity measures responsiveness of demand for one good to price changes of another good, showing if goods are substitutes or complements. Income elasticity measures responsiveness of demand to changes in income, showing if goods are normal or inferior.
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Elasticity measures the responsiveness of quantity demanded or supplied to changes in factors like price. Price elasticity of demand measures how much quantity demanded changes with price changes. Demand can be elastic, inelastic, unit elastic, perfectly elastic, or perfectly inelastic depending on its elasticity value. Price elasticity of supply also measures how quantity supplied responds to price changes. Supply can be inelastic, unit elastic, elastic, perfectly inelastic, or perfectly elastic. Income elasticity measures responsiveness of demand to income changes.
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Elasticity measures the responsiveness of demand to changes in price or income. There are several types of elasticity:
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2. Income elasticity measures how quantity demanded responds to changes in consumer income. It can be positive, negative, or zero depending on whether demand moves in the same direction, opposite direction, or does not change with income.
3. Cross elasticity measures how the demand for one good responds to price changes in another good. It can be positive, negative, or
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This document discusses different types of elasticity, including price elasticity of demand, cross elasticity of demand, and income elasticity of demand. It explains how to measure elasticity using various methods like percentage change method, total expenditure method, point method, and arc method. Factors affecting price elasticity of demand are also covered, such as availability of substitutes, consumer loyalty, necessities vs luxuries, and proportion of income spent. The relationship between elasticity and total revenue is described. Demand can be perfectly inelastic, inelastic, unitary elastic, or perfectly elastic depending on the responsiveness of quantity to price changes.
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The document discusses the concept of elasticity in economics. It defines elasticity as measuring the responsiveness of one variable to changes in another. It then focuses on price elasticity of demand, explaining that it measures the responsiveness of quantity demanded to changes in price. It provides formulas for calculating price elasticity of demand using percentage changes in quantity and price. It also discusses other concepts like determinants of demand elasticity and different types of elasticities that can be measured.
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Elasticity measures the responsiveness of quantity demanded or supplied to changes in price. Elasticities allow economists to compare responsiveness across markets in a unit-free way. The key elasticities are the price elasticity of demand, which measures how sensitive quantity demanded is to price changes, and the price elasticity of supply, which measures responsiveness of quantity supplied. Elasticities can indicate whether demand or supply is elastic (responsive), inelastic (unresponsive), or unit elastic (equal responsiveness). Economists use point and arc formulas to calculate elasticities at specific points on demand or supply curves.
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This document defines and explains different concepts related to elasticity of demand. It discusses:
- The definition of elasticity of demand as the percentage change in quantity demanded due to a percentage change in price.
- Methods to measure elasticity including the total outlay method, percentage method, point elasticity, arc elasticity, and geometric method.
- Examples are given to show elasticity equal to 1, less than 1, and greater than 1.
- Income elasticity of demand and cross elasticity of demand are also defined.
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Production involves transforming inputs into outputs through factors of production like land, labor, capital and entrepreneurship. A production function mathematically models the relationship between inputs and maximum possible output, assuming constant technology. In the short run, some inputs are fixed while in the long run all inputs are variable. Total product is the total output from a variable input. Average product is total product divided by the input quantity. Marginal product is the change in total product from a small change in the variable input. A table is provided showing how total, average and marginal product change at different labor input levels.
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This document discusses market equilibrium and the impact of government intervention in markets. It defines market equilibrium as the price where quantity demanded equals quantity supplied. The document discusses how equilibrium changes with shifts in supply or demand. It also explains different types of government intervention like price controls, taxes, and subsidies. Specific policies discussed include price ceilings, price floors, and minimum wages. The effects of binding versus non-binding price controls are explained, such as shortages from price ceilings and surpluses from price floors. The document concludes by asking if price controls are good policy tools.
Elasticity 2
This document discusses measuring income elasticity at a point on an Engel curve. It explains that income elasticity is measured similarly to supply elasticity by calculating the percentage change in quantity demanded divided by the percentage change in income between two points on the Engel curve. The document also briefly mentions applications of elasticity coefficients to economic policy and business decisions.
Effect of govn interventation
The document discusses the effects of government intervention in markets through price ceilings. When price ceilings are implemented, they create excess demand by limiting supply. Producers with higher costs are forced to shut down operations. Consumers are naturally rationed due to restricted supply, and only those able to pay high opportunity costs will have their demand met. Ultimately, both consumers and producers lose out as a result of price ceilings, so no group benefits in the end.
Consumer surplus
1. Consumers surplus is the difference between the maximum price a consumer is willing to pay and the actual price paid for a good. It is represented by the area under the demand curve and above the price.
2. An example is given of consumers surplus for buyers of goats at different prices. Total consumers surplus is higher when there are two goats available at a lower price rather than one goat at a higher price.
3. Producers surplus is the difference between the selling price and the producer's costs. It is represented by the area above the supply curve and below the price. Market efficiency is maximized when total surplus, the sum of consumers and producers surplus, is highest.
Basics of demand and supply
This document provides an overview of demand and supply basics. It defines demand as people's want or need for a good or service backed by their ability and willingness to pay. It explains how to draw a demand curve by plotting a demand schedule that shows quantity demanded at different price points. The key features of a demand curve are that it slopes downward, showing an inverse relationship between price and quantity demanded due to diminishing marginal utility. Movement along the curve represents a price effect, while a shift in the curve can occur due to non-price factors like changes in income, substitute prices, or expectations. The document uses the example of water demand in Kathmandu to illustrate these concepts.
Supply
This document discusses supply, supply curves, and factors that affect supply. It defines supply as the quantity producers are willing to sell at a given price while holding other factors constant. The supply curve is upward sloping because marginal costs increase with higher production. Changes in marginal costs, number of producers, and expectations can shift the supply curve. Supply is more elastic when it is easier and faster for businesses to change production in response to price changes. While computer prices have fallen, supply has increased, which can be explained by technological improvements lowering marginal costs of production.
introduction to micro economics
This document provides an introduction to microeconomics, including:
- Microeconomics studies the behavior of individual economic units like households, firms, and consumers, and how they make decisions and interact in markets.
- The key themes are the allocation of resources, the tradeoffs people make, and how prices determine optimal value.
- Economic theories provide explanations and make predictions, while models use mathematics to simulate and estimate phenomena.
- Markets are where buyers and sellers interact to set prices, and can be competitive or non-competitive depending on factors like government involvement.
- The document provides examples of microeconomic concepts like firms optimizing profits and concludes with sample exam questions.
slide of Consumer behaviour f
Samuelson developed revealed preference theory in 1948 as an alternative to existing demand theories. Revealed preference theory explains consumer demand based on their actual observed choices between commodity bundles at different price points, rather than assuming consumers have internal utility functions. It deduces utility from behavior. The theory's key assumptions are rationality, consistency, and transitivity of preferences. It holds that a consumer's choice reveals their preference - if they choose bundle A over B, A is revealed to be preferred.
Designing visual communication
This document discusses best practices for designing effective visual communication. It outlines principles of graphic design like consistency, contrast, balance, and emphasis that make visuals more understandable. The document advises choosing a clear message to illustrate, considering the overall flow, and highlighting complex ideas. It also provides tips for presenting data visually and using photographs appropriately, ensuring visuals are accurate, documented, and honest.
Dead weight loss slide of KU
This document discusses the costs of taxation in terms of deadweight loss. It explains that taxes reduce overall welfare by creating a wedge between the price paid by buyers and received by sellers. This leads to a reduction in quantity traded below the efficient market level. The deadweight loss is the loss of overall surplus, and grows as the tax increases and distorts market incentives more. Tax revenue initially rises with the tax rate but eventually falls as the tax starts to significantly reduce the size of the market. The deadweight loss from taxation depends on the price elasticities of supply and demand.
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Elasticity 1
- 1. Elasticity: Concept, Measurement and Determinants Dadhi Adhikari Kathmandu College of Management 20th Sept, 2007
- 2. Meaning of Elasticity • Let Y=f(x) • Elasticity of Y with respect to X is defined as percentage change in Y due to one percent change in X • Mathematically ∞ ≅ ∆ ∆ == x x x x x x Q P Q P P% Q% dP dQ P Q inchange inchange E
- 3. Price Elasticity of Demand • Responsiveness of quantity demanded of a commodity to change in its own price x x Q P dP dQ E =
- 4. Types of price elasticity 1. Perfectly elastic demand E=∞ 2. Relatively elastic demand E>1 3. Unitary elastic demand E=1 4. Relatively inelastic demand E<1 5. Perfectly inelastic demand E=0 D D
- 5. How to measure? • Point Elasticity: If price change is very small then point elasticity is the appropriate measure of elasticity. Point elasticity measures the elasticity at particular point of demand curve. • Here price elasticity of demand at point A is given by x x Q P dP dQ E = APx QX B C At point B, elasticity = infinity At point C, elasticity = zero Hence price elasticity varies along a linear demand curve
- 6. How to measure? • Arc Elasticity: If price change is relatively large then Arc Elasticity is appropriate measure P1 P2 Q1 Q2 A B 12 12 12 12 * QQ PP PP QQ E + + − − =
- 7. Sign of Price Elasticity of Demand • Sign of price elasticity of demand is always negative due to demand law. However we always take absolute value to explain the elasticity of demand. • Sign is positive for Giffen goods
- 8. Determinants of Price Elasticity of Demand • Availability of substitute: elastic • Time horizon: in long run demand is elastic • Habit: inelastic • Definition of market: Narrowly defined market =>elastic demand • Necessities vs luxuries: Necessities => inelastic demand
- 9. Income elasticity of demand incomeYHere Q Y == dY dQ E 1.Income elasticity is positive for Normal goods and negative for inferior goods 2. Income elasticity of demand is greater than one for luxuries and less than one for necessities.
- 10. Cross elasticity of demand x y y x xy Q P dP dQ E *= Cross elasticity is positive for substitute and negative for complementary goods
- 11. Numerical example • Let the demand equation is Q=60 – 10 P. Find the price elasticity of demand when price increases from Rs 2 to Rs 3