AS Economics PED graph based introduction!!

1. AS Economics
Mr Ahern

2. Just a bit of a recap
So what would
make this shift
to the left?

3. Recap cont….

4. Examples of factors that result
in shifts?

5. So what is today about then?

7. Learning objectives
To further develop
knowledge of Supply and
Demand laws / factors
To introduce Elasticity
Undertake basic
calculations

8. Elasticity
“Elasticity is a measure of
the extent to which a
quantity responds to a
change in a variable.”

9. Price Elasticity of Demand
“The responsiveness of
Demand to a change in price.”
Elastic Inelastic
Percentage change in
Demand will be
Greater than change in price.
Percentage change in
price will be
Greater than change in demand.

10. Price Elastic Goods
• Very responsive to Price changes
• Many Substitutes (undifferentiated)
• Products widely available

11. Price
Inelastic Goods
• Less responsive to Price changes
• *** Inelastic goods are still affected by price rises! ***
• Inelastic goods tend to be…
– Highly branded (highly fashionable)
– Innovative
– In short supply
– Few Substitutes
– Habit Forming

12. Calculating P.E.D.
P.E.D. = Percentage change in Demand
Percentage change in Price
% Change = Difference x 100 = _____ %
Original

13. Calculating P.E.D.
Value Description Explanation
• 0 Perfectly Inelastic Price has no effect on
demand at all
• 0<1 Inelastic Price has a small effect
on demand
• 1 Unitary Changes are the same
• 1<Infinity Elastic Demand is very sensitive to
price
• Infinity Perfectly Any Increase in price, kill
Elastic demand

14. A Demand Curve of an Elastic Good
Price
Quantity Demanded
0
D
250
200
150
100
50
100 200 300 400 500 600

15. Total Revenue at £150
Price
Quantity Demanded
0
D
250
200
150
100
50
600 x 150
100 200 300 400 500 600

16. Total Revenue at £200
Price
Quantity Demanded
0
D
250
200
150
100
50
200 x 100
100 200 300 400 500 600

17. A Demand Curve of an Elastic Good
Price
Quantity Demanded
0
D
250
200
150
100
50
Revenue Gained
Due To Price
Increase
Revenue Lost Due
To Price
Increase
100 200 300 400 500 600

18. A Demand Curve of an Inelastic Good
Price
Quantity Demanded
0
D
250
200
150
100
50
20 40 60 80 100 120

19. A Demand Curve of an Inelastic Good
Price
Quantity Demanded
0
D
250
200
150
100
50
50 x 60
20 40 60 80 100 120

20. A Demand Curve of an Inelastic Good
Price
Quantity Demanded
0
D
250
200
150
100
50
250 x 40
20 40 60 80 100 120

21. A Demand Curve of an Inelastic Good
Price
Revenue Lost Due
To Price
Increase
Quantity Demanded
0
D
250
200
150
100
50
Revenue
Gained
Due To
Price
Increase
20 40 60 80 100 120

22. A Demand Curve of an Perfectly Inelastic
Good Price
Quantity Demanded
0
D
50
40
30
20
10
2 4 6 8 10

23. A Demand Curve of an Perfectly Inelastic
Good Price
Quantity Demanded
0
D
50
40
30
20
10
2 4 6 8 10

24. A Demand Curve of an Perfectly Inelastic
Good Price
Quantity Demanded
0
D
50
40
30
20
10
2 4 6 8 10

25. A Demand Curve of an Perfectly Inelastic
Good Price
Quantity Demanded
0
D
50
40
30
20
10
Revenue Gained Due
To Price
Increase
2 4 6 8 10

26. A Demand Curve of an Perfectly Elastic
Good Price
Quantity Demanded
0
D
1000
800
600
400
200
50 100 150 200 250

27. A Demand Curve of an Perfectly Elastic
Good Price
Quantity Demanded
0
D
1000
800
600
400
200
400 x 250
50 100 150 200 250

28. A Demand Curve of an Perfectly Elastic
Good Price
Quantity Demanded
0
D
1000
800
600
400
200
Revenue Lost Due
To Price
Increase
50 100 150 200 250

29. A Demand Curve for a Good with Unitary
Price Elasticity Price
Quantity Demanded
0
D
y
x
z w

30. A Demand Curve for a Good with Unitary
Price Elasticity Price
Revenue Lost Due To Price Increase
Quantity Demanded
0
D
y
x
z w
Revenue
Gained
Due To
Price
Increase

31. Summing Up
Elastic Goods
• Percentage change in Demand is greater than
percentage change in price.
• Highly responsive to price change
• Increases in price will lead to fall in total revenue.
Inelastic Goods
• Percentage change in Demand is Less than percentage
change in price.
• Slightly responsive to price change (BUT STILL
RESPONSIVE!)
• Increases in price will lead to a raise in total revenue.

32. Products I bought at the
weekend
Shoes from Primark
THINGS I
BOUGHT OVER
THE WEEKEND
Fashion Suit
Free Range Eggs
Present for mum
Special offer pizza
Bicycle

33. Learning objectives
To further develop
knowledge of Supply and
Demand laws / factors
To introduce Elasticity
Undertake basic
calculations

34. Complete worksheet