Price elasticity supply
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Price elasticity of supply measures how much the quantity supplied of a good responds to changes in its price. Supply is more elastic when producers can easily increase output by utilizing spare capacity, high stock levels, short production times, or flexible reallocation of resources. Supply is inelastic when producers face constraints increasing output in response to higher prices. The elasticity of supply determines whether a change in demand results in a large or small change in price.
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Price Elasticity of Supply
This document discusses the price elasticity of supply. It defines price elasticity of supply as the relationship between a change in quantity supplied and a change in price. It also provides the formula for calculating price elasticity of supply. Supply can be elastic, unit elastic, or inelastic depending on the coefficient. The document lists factors that affect price elasticity of supply, such as factor substitution possibilities, spare production capacity, stock levels, and time frames. Short-term supply may be more inelastic due to fixed factors, while long-run supply is more elastic.
Elasticity Of Supply And Demand
Elasticity measures the responsiveness of quantity to price changes. It allows economists to compare markets without standardizing units. There are own price elasticities of demand and supply that measure responsiveness of quantity to the good's own price. Demand is more price sensitive when elasticity is further from zero. Total expenditures can increase or decrease with price changes depending on elasticity. Other elasticities include cross price and income elasticities.
Price Elasticity Of Supply
The document discusses price elasticity of supply, which measures how much a supplier's quantity supplied responds to changes in price. It defines the coefficient of price elasticity of supply and explains that supply can be elastic, inelastic, or unitary depending on whether a percentage change in price results in a greater, lesser, or equal percentage change in quantity supplied. Examples of perfectly elastic and perfectly inelastic supply curves are also provided.
The Market Forces of Supply and Demand
This document discusses the economic concepts of supply and demand. It defines key terms like markets, demand curves, determinants of demand and supply, and equilibrium. It explains how supply and demand interact through examples of how changes in demand or supply can shift the curves and impact equilibrium price and quantity. For example, an increase in demand from hot weather leads to a higher equilibrium price and quantity sold of ice cream.
PRICE ELASTICITY OF SUPPLY WITH EXAMPLES
Price elasticity of supply measures how responsive the quantity supplied of a good is to changes in its price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price. The elasticity can be elastic (above 1), inelastic (below 1), unitary (equal to 1), perfectly elastic (infinite), or perfectly inelastic (zero). Factors like time, production capacity, and available inventory affect a good's price elasticity of supply. An example is provided where an individual's supply of bags was elastic, with a price elasticity of 4, as quantity supplied increased by 100% when price rose by 25%.
Elasticity Concepts
Elasticity measures how responsive buyers and sellers are to changes in market conditions like price and income. Price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. Price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price. Elasticity analysis can be used to determine how changes in supply or demand will impact market equilibrium and total revenue.
Price elasticity
Here are the steps to solve the problems:
1. DEMAND FOR good Y
A. Q1 = 160; P1 = 110
B. Q2 = 240; P2 = 90
% change in Q = (Q2 - Q1)/Q1 = (240 - 160)/160 = 50%
% change in P = (P1 - P2)/P1 = (110 - 90)/110 = 18.18%
ED = % change in Q / % change in P = 50/18.18 = 2.75
2. SUPPLY FOR good X
Q1 = 75; P1 = 30
Q2 = 175; P2 = 31
% change in
Cross Price Elasticity of Demand
Cross price elasticity of demand measures the responsiveness of the demand for good X to a change in the price of a related good Y. It can be positive for substitutes, where a rise in the price of one good increases demand for the other, or negative for complements, where a fall in the price of one good increases demand for the other. The closer the relationship between the two goods, the higher the coefficient of cross price elasticity.
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Price Elasticity of Supply
This document discusses the price elasticity of supply. It defines price elasticity of supply as the relationship between a change in quantity supplied and a change in price. It also provides the formula for calculating price elasticity of supply. Supply can be elastic, unit elastic, or inelastic depending on the coefficient. The document lists factors that affect price elasticity of supply, such as factor substitution possibilities, spare production capacity, stock levels, and time frames. Short-term supply may be more inelastic due to fixed factors, while long-run supply is more elastic.
Elasticity Of Supply And Demand
Elasticity measures the responsiveness of quantity to price changes. It allows economists to compare markets without standardizing units. There are own price elasticities of demand and supply that measure responsiveness of quantity to the good's own price. Demand is more price sensitive when elasticity is further from zero. Total expenditures can increase or decrease with price changes depending on elasticity. Other elasticities include cross price and income elasticities.
Price Elasticity Of Supply
The document discusses price elasticity of supply, which measures how much a supplier's quantity supplied responds to changes in price. It defines the coefficient of price elasticity of supply and explains that supply can be elastic, inelastic, or unitary depending on whether a percentage change in price results in a greater, lesser, or equal percentage change in quantity supplied. Examples of perfectly elastic and perfectly inelastic supply curves are also provided.
The Market Forces of Supply and Demand
This document discusses the economic concepts of supply and demand. It defines key terms like markets, demand curves, determinants of demand and supply, and equilibrium. It explains how supply and demand interact through examples of how changes in demand or supply can shift the curves and impact equilibrium price and quantity. For example, an increase in demand from hot weather leads to a higher equilibrium price and quantity sold of ice cream.
PRICE ELASTICITY OF SUPPLY WITH EXAMPLES
Price elasticity of supply measures how responsive the quantity supplied of a good is to changes in its price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price. The elasticity can be elastic (above 1), inelastic (below 1), unitary (equal to 1), perfectly elastic (infinite), or perfectly inelastic (zero). Factors like time, production capacity, and available inventory affect a good's price elasticity of supply. An example is provided where an individual's supply of bags was elastic, with a price elasticity of 4, as quantity supplied increased by 100% when price rose by 25%.
Elasticity Concepts
Elasticity measures how responsive buyers and sellers are to changes in market conditions like price and income. Price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. Price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price. Elasticity analysis can be used to determine how changes in supply or demand will impact market equilibrium and total revenue.
Price elasticity
Here are the steps to solve the problems:
1. DEMAND FOR good Y
A. Q1 = 160; P1 = 110
B. Q2 = 240; P2 = 90
% change in Q = (Q2 - Q1)/Q1 = (240 - 160)/160 = 50%
% change in P = (P1 - P2)/P1 = (110 - 90)/110 = 18.18%
ED = % change in Q / % change in P = 50/18.18 = 2.75
2. SUPPLY FOR good X
Q1 = 75; P1 = 30
Q2 = 175; P2 = 31
% change in
Cross Price Elasticity of Demand
Cross price elasticity of demand measures the responsiveness of the demand for good X to a change in the price of a related good Y. It can be positive for substitutes, where a rise in the price of one good increases demand for the other, or negative for complements, where a fall in the price of one good increases demand for the other. The closer the relationship between the two goods, the higher the coefficient of cross price elasticity.
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The link between income and demand is explored when we cover income elasticity of demand. The most important distinction to make in this section is between normal and inferior products. Please also be clear on the difference between a normal necessity and a normal luxury. The coefficient of income elasticity is important for businesses because it helps them to forecast, other factors remaining the same, how demand for their goods and services will be affected by changes in the real incomes of consumers as an economy moves through the various stages of a business cycle. Producers of inferior goods tend to do well when an economy is in recession or when real wages are falling!
Law of supply
The law of supply states that there is a positive relationship between price and quantity supplied - as price increases, quantity supplied also increases. This is because higher prices increase producer profits, leading firms to substitute toward producing more of goods with higher prices. The law of supply assumes no changes to technology, costs of production, number of firms, seller expectations, taxes/subsidies, or prices of other goods. Exceptions can occur for rare goods, if sellers expect lower future prices, during stock clearances, or for perishable and agricultural products.
Aggregate Demand and Aggregate Supply
This document discusses short-run economic fluctuations using the aggregate demand and aggregate supply model. It explains that in the short-run, the aggregate supply curve slopes upward due to sticky wages and prices. Shifts in aggregate demand or supply can cause fluctuations in output and unemployment. Recessions occur when aggregate demand decreases, causing output and employment to fall.
Elasticity of Supply
Elasticity of supply measures how responsive the quantity supplied is to changes in price. It can be elastic, inelastic, or unitary elastic. Elasticity is calculated by taking the percentage change in quantity supplied divided by the percentage change in price. If the result is greater than 1, supply is elastic. If it is less than 1, supply is inelastic. If it is exactly 1, supply is unitary elastic. Elastic supply responds strongly to price changes in the long run, while inelastic supply is not very sensitive to price changes in the short run. Unitary elastic supply means quantity and price move proportionately.
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This chapter discusses the costs of production for firms. It will examine what costs are included in a firm's total costs, how costs are related to the production process and output quantity, and the meaning of average and marginal costs. The chapter analyzes cost concepts like total, average, and marginal costs. It also discusses the relationship between costs and a firm's production function as well as the differences between fixed and variable costs.
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1. Supply and demand are the market forces that determine price and quantity in a competitive market. The demand curve shows that as price decreases, quantity demanded increases, and the supply curve shows that as price increases, quantity supplied also increases.
2. Equilibrium occurs where the supply and demand curves intersect, establishing an equilibrium price and quantity where the amounts buyers want to purchase and sellers want to sell are equal.
3. Various factors can cause the supply and demand curves to shift, changing the equilibrium price and quantity in the market. Changes in income, prices of related goods, tastes and preferences, expectations, technology and number of buyers/sellers all impact supply and demand.
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The document discusses concepts related to demand and supply, including:
1. Demand curves show the relationship between price and quantity demanded, while supply curves show the relationship between price and quantity supplied.
2. The intersection of the demand and supply curves determines the equilibrium price and quantity in a market.
3. Elasticity measures the responsiveness of demand or supply to various factors like price, income, and price of related goods. It helps to determine how demand and supply respond to changes in the market.
Elasticity and Its Application
This document discusses elasticity and its applications. It defines price elasticity of demand and supply as the percentage change in quantity demanded or supplied given a percentage change in price. Demand can be elastic, inelastic, or unit elastic depending on how much quantity changes with price. The document also discusses factors that determine elasticity, how to compute elasticity, and how shifts in supply or demand impact equilibrium price and quantity in a market.
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This document defines elasticity of supply as the responsiveness of the quantity supplied of a good to a change in its price. It provides a formula for calculating elasticity of supply and describes different types of supply elasticity, including perfect inelastic supply where quantity supplied does not change with price changes, relatively less-elastic supply where supply changes less than proportionately to price changes, relatively greater elastic supply where supply changes substantially to small price changes, unit elastic supply where supply changes exactly proportionately to price changes, and perfect elastic supply where supply is infinite at a given price point.
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Demand, supply and equilibrium ,demand ,equilibrium ,economy ,economia ,business and economy ,economic development ,business ,small business ,business intelligence ,online business ,business model ,market ,social media marketing ,marketing ,market share ,internet marketing ,digital marketing ,content marketing ,market analysis ,market size ,finance ,financial ,financial services ,public finance ,banking ,bank ,non bank financial institutions ,modern banking ,accounting ,accessibility ,open access ,logistics ,supply chain ,company profiles ,procurement
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For downloading this contact- bikashkumar.bk100@gmail.com
Prepared by Students of University of Rajshahi
Tonmoy Halder
Shopna Akter
Bipul Chandra
Mamunur Rahaman
Siam Hossain
Jibon Rahman
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The document discusses the concepts of supply and demand. It states that as price increases, demand decreases, and as price decreases, demand increases. Conversely, as price increases, supply increases, and as price decreases, supply decreases. The document explains that consumers buy more of something when it is cheaper to minimize expenses and maximize utility, while producers sell more of something when the price is higher to minimize costs and maximize profits. The equilibrium price is reached where the quantity demanded equals the quantity supplied. [/SUMMARY]
Perfect Competition Lecture Notes (Economics)
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Consumer producer surplus
Consumer surplus is the difference between what consumers are willing to pay for a good and what they actually pay, represented by the area under the demand curve and above the market price. Producer surplus is the difference between the price producers are willing to supply a good for and the price they actually receive, shown by the area above the supply curve and below the market price. Changes in supply and demand impact both consumer surplus and producer surplus - a price increase decreases consumer surplus while increasing producer surplus. Both concepts are important when analyzing the effects of government interventions in markets.
Negative externalities
Negative externalities occur when production or consumption impose costs on third parties not involved in the market transaction. This leads to market failure as prices do not reflect the full social costs. Examples include pollution from factories imposing health costs, and noise pollution from airlines imposing nuisance costs. Taxes or regulations can be used to internalize these external costs and improve economic efficiency by aligning private and social costs. However, determining the appropriate tax level can be difficult and taxes may impact consumer welfare.
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Tutor2u - Income Elasticity of Demand
The link between income and demand is explored when we cover income elasticity of demand. The most important distinction to make in this section is between normal and inferior products. Please also be clear on the difference between a normal necessity and a normal luxury. The coefficient of income elasticity is important for businesses because it helps them to forecast, other factors remaining the same, how demand for their goods and services will be affected by changes in the real incomes of consumers as an economy moves through the various stages of a business cycle. Producers of inferior goods tend to do well when an economy is in recession or when real wages are falling!
Law of supply
The law of supply states that there is a positive relationship between price and quantity supplied - as price increases, quantity supplied also increases. This is because higher prices increase producer profits, leading firms to substitute toward producing more of goods with higher prices. The law of supply assumes no changes to technology, costs of production, number of firms, seller expectations, taxes/subsidies, or prices of other goods. Exceptions can occur for rare goods, if sellers expect lower future prices, during stock clearances, or for perishable and agricultural products.
Aggregate Demand and Aggregate Supply
This document discusses short-run economic fluctuations using the aggregate demand and aggregate supply model. It explains that in the short-run, the aggregate supply curve slopes upward due to sticky wages and prices. Shifts in aggregate demand or supply can cause fluctuations in output and unemployment. Recessions occur when aggregate demand decreases, causing output and employment to fall.
Elasticity of Supply
Elasticity of supply measures how responsive the quantity supplied is to changes in price. It can be elastic, inelastic, or unitary elastic. Elasticity is calculated by taking the percentage change in quantity supplied divided by the percentage change in price. If the result is greater than 1, supply is elastic. If it is less than 1, supply is inelastic. If it is exactly 1, supply is unitary elastic. Elastic supply responds strongly to price changes in the long run, while inelastic supply is not very sensitive to price changes in the short run. Unitary elastic supply means quantity and price move proportionately.
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Supply Demand and Equilibrium
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Different types of demand..
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Cross elasticity of demand
Cross price elasticity of demand (CED) measures the responsiveness of demand for good X when the price of a related good Y changes. CED is calculated as the percentage change in quantity demanded of good X divided by the percentage change in price of good Y. Substitutes have a positive CED, meaning demand for one increases when the other's price increases, while complements have a negative CED with demand moving in opposite directions. Knowing the CED allows businesses to predict how pricing changes might impact demand for their own products and complementary goods.
Exchange Rates Notes - A-level & IB Economics
This document provides an overview of exchange rates, including different exchange rate systems (fixed, floating, managed float) and how exchange rates change. It discusses demand and supply factors that influence floating exchange rates, such as interest rates, inflation rates, and a country's trade balance. Examples are given to illustrate how governments intervene in currency markets to maintain fixed exchange rates. Advantages and disadvantages of different systems are also compared.
Supply and Demand
1. Supply and demand are the market forces that determine price and quantity in a competitive market. The demand curve shows that as price decreases, quantity demanded increases, and the supply curve shows that as price increases, quantity supplied also increases.
2. Equilibrium occurs where the supply and demand curves intersect, establishing an equilibrium price and quantity where the amounts buyers want to purchase and sellers want to sell are equal.
3. Various factors can cause the supply and demand curves to shift, changing the equilibrium price and quantity in the market. Changes in income, prices of related goods, tastes and preferences, expectations, technology and number of buyers/sellers all impact supply and demand.
Demand,supply,Demand and supply,equilibrium between demand and supply
The document discusses concepts related to demand and supply, including:
1. Demand curves show the relationship between price and quantity demanded, while supply curves show the relationship between price and quantity supplied.
2. The intersection of the demand and supply curves determines the equilibrium price and quantity in a market.
3. Elasticity measures the responsiveness of demand or supply to various factors like price, income, and price of related goods. It helps to determine how demand and supply respond to changes in the market.
Elasticity and Its Application
This document discusses elasticity and its applications. It defines price elasticity of demand and supply as the percentage change in quantity demanded or supplied given a percentage change in price. Demand can be elastic, inelastic, or unit elastic depending on how much quantity changes with price. The document also discusses factors that determine elasticity, how to compute elasticity, and how shifts in supply or demand impact equilibrium price and quantity in a market.
Price ceilings & price floors
This presentation discusses price controls, specifically price ceilings and price floors. It provides examples of rent control as a price ceiling and minimum wage as a price floor. It analyzes the impact of binding versus non-binding price ceilings and floors. A binding price ceiling that sets a maximum price below the equilibrium price will result in a shortage. Similarly, a binding price floor that sets a minimum price above the equilibrium price will cause a surplus or unemployment. Price controls that are not binding have no impact on the market. The presentation evaluates that price ceilings can lead to shortages, rationing, and discrimination, while price floors can cause unemployment and ultimate loss for labor.
Elasticity of supply
This document defines elasticity of supply as the responsiveness of the quantity supplied of a good to a change in its price. It provides a formula for calculating elasticity of supply and describes different types of supply elasticity, including perfect inelastic supply where quantity supplied does not change with price changes, relatively less-elastic supply where supply changes less than proportionately to price changes, relatively greater elastic supply where supply changes substantially to small price changes, unit elastic supply where supply changes exactly proportionately to price changes, and perfect elastic supply where supply is infinite at a given price point.
Consumer surplus
Consumer surplus is a measure of consumer welfare that represents the difference between what consumers are willing to pay for a good or service and what they actually pay. Consumer surplus is represented by the area under the demand curve and above the market price. An increase in supply costs leads to higher market prices and a reduction in consumer surplus, while an increase in market demand causes consumer surplus to rise. When demand is inelastic, consumer surplus is greater because some buyers are willing to pay high prices, but when demand is perfectly elastic, consumer surplus is zero as the price paid equals willingness to pay.
Aggregate Demand and Aggregate Supply and Curves
The document discusses aggregate demand and aggregate supply. It defines aggregate demand as the total demand for final goods and services in an economy at a given time and price level. The key components of aggregate demand are consumption, investment, government spending, exports and imports. It also discusses how aggregate demand is downward sloping. The document then defines aggregate supply as the total supply of goods and services in an economy. It describes how the aggregate supply curve slopes upward in the short-run but is vertical in the long-run.
Public Goods and Common Resources
This document discusses different types of goods: private goods, public goods, common resources, and natural monopolies. It defines excludability and rivalry as characteristics used to classify goods. Public goods are non-excludable and non-rival, leading to free-rider problems where the market fails to provide them. Common resources are non-excludable but rival, prone to overuse in the tragedy of the commons. The document stresses the importance of well-defined property rights to avoid market failures.
Demand, supply and equilibrium
Demand, supply and equilibrium ,demand ,equilibrium ,economy ,economia ,business and economy ,economic development ,business ,small business ,business intelligence ,online business ,business model ,market ,social media marketing ,marketing ,market share ,internet marketing ,digital marketing ,content marketing ,market analysis ,market size ,finance ,financial ,financial services ,public finance ,banking ,bank ,non bank financial institutions ,modern banking ,accounting ,accessibility ,open access ,logistics ,supply chain ,company profiles ,procurement
Consumer Surplus
Macro Economics
For downloading this contact- bikashkumar.bk100@gmail.com
Prepared by Students of University of Rajshahi
Tonmoy Halder
Shopna Akter
Bipul Chandra
Mamunur Rahaman
Siam Hossain
Jibon Rahman
Price Determination
The document discusses the concepts of supply and demand. It states that as price increases, demand decreases, and as price decreases, demand increases. Conversely, as price increases, supply increases, and as price decreases, supply decreases. The document explains that consumers buy more of something when it is cheaper to minimize expenses and maximize utility, while producers sell more of something when the price is higher to minimize costs and maximize profits. The equilibrium price is reached where the quantity demanded equals the quantity supplied. [/SUMMARY]
Perfect Competition Lecture Notes (Economics)
FellowBuddy.com is an innovative platform that brings students together to share notes, exam papers, study guides, project reports and presentation for upcoming exams.
We connect Students who have an understanding of course material with Students who need help.
Benefits:-
# Students can catch up on notes they missed because of an absence.
# Underachievers can find peer developed notes that break down lecture and study material in a way that they can understand
# Students can earn better grades, save time and study effectively
Our Vision & Mission – Simplifying Students Life
Our Belief – “The great breakthrough in your life comes when you realize it, that you can learn anything you need to learn; to accomplish any goal that you have set for yourself. This means there are no limits on what you can be, have or do.”
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Demand,supply,Demand and supply,equilibrium between demand and supply
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Consumer producer surplus
Consumer surplus is the difference between what consumers are willing to pay for a good and what they actually pay, represented by the area under the demand curve and above the market price. Producer surplus is the difference between the price producers are willing to supply a good for and the price they actually receive, shown by the area above the supply curve and below the market price. Changes in supply and demand impact both consumer surplus and producer surplus - a price increase decreases consumer surplus while increasing producer surplus. Both concepts are important when analyzing the effects of government interventions in markets.
Negative externalities
Negative externalities occur when production or consumption impose costs on third parties not involved in the market transaction. This leads to market failure as prices do not reflect the full social costs. Examples include pollution from factories imposing health costs, and noise pollution from airlines imposing nuisance costs. Taxes or regulations can be used to internalize these external costs and improve economic efficiency by aligning private and social costs. However, determining the appropriate tax level can be difficult and taxes may impact consumer welfare.
Externalities introduction
Externalities are spill-over effects from production and consumption that are not compensated for through market transactions. They can be positive or negative and cause market failure if social costs and benefits are not accounted for. Private costs and benefits differ from social costs and benefits due to externalities. For example, with negative externalities, social costs exceed private costs, leading to overproduction. Economists value externalities using methods like shadow pricing and willingness to pay. Governments consider net social benefits when deciding between projects to maximize returns to society.
Behavioural economics
This document introduces concepts from behavioural economics, including bounded rationality and heuristics. It discusses how social, emotional, and psychological factors can influence economic decisions in non-rational ways. Examples are given of how choice architecture, defaults, framing, and other cognitive biases shape choices. Behavioural economics aims to design "nudges" through subtle changes that guide people towards making beneficial decisions. However, some argue that nudging risks excessive paternalism or underestimating consumer rationality.
Government subsidies
This document discusses government subsidies provided to producers and consumers. It defines subsidies as financial or other support from the government. Examples of subsidies for producers include biofuel subsidies for farmers and subsidies for wind farm investment. Examples of subsidies for consumers include food/fuel subsidies and child care for working families. The document then examines how subsidies work through diagrams, showing how they lead to a lower equilibrium price and higher equilibrium quantity. It also justifies why governments introduce subsidies and evaluates them using cost-benefit analysis.
Indirect taxes
The document discusses indirect taxes imposed by governments that increase producer supply costs. It provides examples of major indirect taxes in the UK such as VAT, fuel duties, and tobacco taxes. It explains how indirect taxes impact market equilibrium through shifting supply curves. The effect of the tax depends on the price elasticity of both supply and demand. Indirect taxes can generate substantial tax revenues for governments.
Types of elasticity of demand
The document discusses four types of elasticity of demand: price elasticity, cross elasticity, income elasticity, and advertising elasticity. It provides details on cross elasticity, explaining that it measures the responsiveness of the quantity demanded of a good to a change in the price of a related good. Cross elasticity can be positive, negative, or zero depending on whether the goods are substitutes, complements, or unrelated. Income elasticity measures the responsiveness of demand for a good to a change in consumer income. It too can be positive, negative, or zero, depending on whether the good is normal, inferior, or if demand is unchanged by income changes. Advertising elasticity measures the responsiveness of demand
Elasticity of Supply
1. Price elasticity of supply measures the responsiveness of quantity supplied to a change in price.
2. It is calculated as the percentage change in quantity supplied divided by the percentage change in price.
3. The elasticity of supply depends on factors like the type of product, production capacity, and time horizon. Products and industries with more flexible inputs and time to adjust will have a more elastic supply.
Price Elasticity of Demand
Price Elasticity of Demand measures how responsive demand is to changes in price. It is calculated by taking the percentage change in quantity demanded divided by the percentage change in price. Perfectly inelastic demand does not change with price changes. Inelastic demand changes less than proportionately to price changes. Unit elastic demand changes proportionately. Elastic demand changes more than proportionately. Factors like substitutes, necessity, income share, and time period impact price elasticity. Producers use elasticity estimates to predict revenue and tax impacts and for price discrimination.
THEORY OF DEMAND
1) The document discusses the economic theory of demand, including what determines demand, the relationship between price and quantity demanded, and the factors that influence demand.
2) Key factors that determine demand include price, income, tastes and preferences, and prices of related goods. The quantity demanded at each price level is shown in a demand schedule and as a downward sloping demand curve.
3) According to the law of demand, quantity demanded increases when price decreases and decreases when price increases, assuming all other factors remain constant. Demand can shift due to changes in these other factors.
Elasticity of demand
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This document discusses elasticity, which measures how responsive buyers and sellers are to changes in market conditions like price. It defines price elasticity of demand as the percentage change in quantity demanded given a percentage change in price. Demand can be elastic, inelastic, or unit elastic depending on how much quantities change relative to price changes. The document then examines factors that determine a good's elasticity like availability of substitutes, percentage of income spent, and whether it is a necessity or luxury. It also defines income elasticity as the responsiveness of quantity demanded to changes in consumer income.
Elasticity Of Demand
Elasticity measures the extent to which demand changes in response to a change in price. There are different degrees of price elasticity including perfectly elastic, perfectly inelastic, unitary elastic, relatively elastic, and relatively inelastic demand. Cross elasticity and income elasticity also measure responsiveness of demand but to other factors like substitute goods and consumer income levels respectively. Methods for measuring price elasticity include the total expenditure method, percentage method, point method, arc elasticity, and revenue method.
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This document discusses the elasticity of supply. It defines supply and the law of supply. Elasticity of supply refers to the responsiveness of quantity supplied to changes in price. There are five types of elasticity: perfectly elastic, perfectly inelastic, elastic, inelastic, and unit elastic. Determinants that impact elasticity include the time period available to adjust supply, improvements in technology, stock availability, number of producers, and increases in production costs relative to output.
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Price elasticity supply
The document defines and explains price elasticity of supply. It provides the formula for calculating price elasticity of supply and explains what values indicate elastic versus inelastic supply. Factors that affect the price elasticity of supply include spare production capacity, stock levels, ease of factor substitution, and time period for production adjustment. Perfectly elastic and inelastic supply curves are illustrated. The document concludes by discussing situations where market supply would be price elastic.
HU200-Supply-modified2020.pptx
The document provides an introduction to supply and demand, including definitions and key concepts. It discusses how supply is defined as the quantity of a commodity offered by producers at a given price and time. Market supply is the total quantity supplied by all producers. The price at which quantity demanded equals quantity supplied is called the equilibrium price. Factors that influence supply are then outlined, such as the price of the commodity, production costs, technology, and expectations. The document concludes by covering price elasticity of supply and the different types of elasticity curves (perfectly elastic, inelastic, unit elastic, etc.).
Theory of supply
The document discusses supply and the law of supply. It defines supply as the quantity of a commodity a firm is willing and able to offer for sale at a given price during a given period of time. The law of supply states that other factors remaining constant, the quantity supplied rises as price increases. It is based on assumptions like prices of other goods remaining constant. Price elasticity of supply measures how responsive quantity supplied is to price changes. It is influenced by factors like time, availability of resources, and improvements in technology.
Supply
The document discusses market supply and its key characteristics. It defines supply as the quantities of a good or service that sellers are willing and able to offer for sale at various prices within a given time period, with other factors held constant. Supply is determined by price and time, and comes out of a company's stock or inventory. The main determinants of supply include price, costs of production, technology, taxes/subsidies, and prices of related goods. The law of supply states that, all else equal, supply and price move directly - higher prices lead to increased supply. Market equilibrium exists when supply equals demand.
Elasticity of demand
This document defines and explains elasticity of demand. Elasticity of demand refers to the ratio between the percentage change in quantity demanded of a product and the percentage change in a factor that influences demand, such as price. Price elasticity of demand specifically measures how much demand for a product changes when the price changes. Demand is elastic if a 1% increase in price leads to a greater than 1% decrease in quantity demanded. Demand is inelastic if a 1% price increase leads to a less than 1% decrease in quantity. Factors like price level, income, necessity, and time period influence whether demand is elastic or inelastic.
Unit-1-Chapter-4-Supply Analysis.pptx
The document discusses the concept of supply. It defines supply as the amount of a commodity sellers are able and willing to offer for sale at a given price over a period of time. Supply is determined by stock available and a seller's willingness given the difference between reservation and market prices. Supply rises as price increases and falls as price decreases according to the law of supply. The elasticity of supply refers to the responsiveness of supply to price changes and depends on factors like the nature of the commodity, time period, scale of production, and mobility of production factors.
supply n law of supply
The document discusses different types of supply:
1. Joint supply refers to the supply of two or more goods that are produced together, like beef and bone or milk and cream.
2. Compound supply is when a single product is obtained from different resources, like petrol from various oil companies or milk from cows, goats, and buffaloes.
3. Market period supply refers to a short time frame of 2-3 hours where supply cannot change rapidly. It is classified into perishable goods, whose supply is inelastic, and durable goods, whose supply increases limitedly with price.
Lesson 7--supply[1]
This document discusses supply, including the law of supply, supply schedules and curves, determinants of supply, and supply elasticity. The key points are:
1) The law of supply states that the quantity supplied varies directly with price - producers will supply more of a product as the price increases.
2) Supply curves show the different quantities producers will supply at different price points. They are generally upward sloping.
3) Determinants that can shift the supply curve include factor costs, technology, regulations, expectations, and the number of firms in the industry. Anything that impacts production costs or ability will shift the supply curve.
Supply
This document discusses the concept of supply in economics. It defines supply as the willingness and ability to sell goods at particular prices over time. The law of supply states that, all else equal, quantity supplied increases with price. Supply is influenced by factors like price, costs of inputs, technology, government policy, and more. Changes in supply can occur through shifts or movements along the supply curve. Elasticity of supply measures the responsiveness of quantity supplied to changes in factors like price. More idle capacity, stock levels, and flexibility of production make supply more elastic in the long-run than the short-run.
Basic Economics With Taxation And Agrarian Reform boa
The document provides an overview of key topics in consumer behavior and economics, including consumer behavior analysis, demand analysis, supply analysis, market equilibrium, production and cost theories, and market structure. It defines important concepts like utility, demand and supply curves, equilibrium price and quantity, costs of production, and elasticity. Various graphs and tables are presented to illustrate consumer choice concepts like indifference curves, the relationship between total utility and marginal utility, and the determinants of demand and supply.
4 supply function
The document discusses the concept of supply in economics. It defines supply as the quantity of a commodity producers are willing and able to sell at a given price over a specific time period. The supply of a product is determined by several factors including its price, production costs, technology, government policies, and more. The supply schedule shows the relationship between price and quantity supplied, while the supply curve illustrates this graphically as an upward-sloping curve. Market equilibrium occurs at the price where quantity supplied equals quantity demanded. A change in the supply curve results from changes in its determinants and causes the equilibrium price and quantity to also change.
Price Elasticity of Supply.pptx
The document discusses price elasticity of supply. It defines price elasticity of supply as a measure of how responsive the quantity supplied of a good is to changes in its price. It provides examples of goods with elastic supply, like fidget spinners, and inelastic supply, like nuclear reactors. Factors that influence whether supply is elastic or inelastic include availability of raw materials, complexity of production, mobility of factors of production, and time needed to respond. Supply is typically more elastic in the long run than short run as producers have more time to adjust their operations.
The Price System
Here are the definitions for the terms in the question:
1. Inferior goods - Goods for which demand decreases when income increases, as consumers switch to higher quality substitutes when they become richer.
2. Giffen goods - Rare goods that people demand more of as the price rises because it is considered a necessity, and it becomes a higher priority when money is tight.
3. Consumer surplus - The difference between the maximum price a consumer would be willing to pay for a good or service and the actual price paid. It measures the benefit consumers receive from purchases.
4. Perfectly elastic demand - Demand curve is horizontal, meaning any change in price results in an infinite change in quantity demanded between zero and
Tutor2u - Price Elasticity of Demand
Normal laws of demand suggest that as prices increase demand decreases whilst firms attempt to supply more (with the opposite happening as prices decrease). The concept of elasticities asks the question ‘by how much does demand and supply change?’ Recent examination reports have made it clear that “price elasticity is an important topic and students should be prepared to apply it to the examination context as well as quote the formulas.” There is a lot to learn in this section – start with a good understanding of what elasticity it and how it is measured. Then consider why it matters for businesses to have a working knowledge / estimate of the coefficient of price elasticity of demand.
Time element in Price theory
- Marshall was the first economist to analyze how time impacts price determination. He divided pricing into four time periods: market period, short period, long period, and secular period.
- The market period is very short, usually days or weeks. For perishable goods like milk, the time period is just one day. Price is determined by demand as supply is fixed.
- In the short period (a few months), supply can be adjusted through measures like adding shifts or hiring more workers. Both supply and demand influence price.
- The long period allows full supply adjustment to demand changes. The long-run or normal price is where average and marginal costs are minimized.
- The secular period is very long, over
Supply theory
Economists agree that supply means the commodity offered for sale at a price. In other words, supply refers to total supply offered for sale at a price to retailers and wholesalers. Sometimes the term market supply is used to denote the supply of perishable commodities with retailers only.
Law-Of-Supply-_-Elasticity-of-Supply-PPT.ppt
The document discusses the concept of supply and the law of supply. It defines supply as the quantity of a product that producers are willing to offer at a given price level within a given time period. The law of supply states that, all else being equal, as price increases, quantity supplied also increases. The document outlines several factors that determine supply, including price of the commodity, firm goals, input prices, technology, government policy, expectations, and natural factors. It also discusses individual supply curves, market supply curves, degrees of elasticity of supply, and methods for measuring price elasticity of supply.
Elasticity of supply
This presentation defines elasticity of supply as the responsiveness of the quantity supplied to changes in price. It discusses the different degrees of elasticity - perfectly elastic, relatively elastic, perfectly inelastic, relatively inelastic, and unitary elastic. Perfectly elastic supply means quantity changes greatly with small price changes. Relatively elastic means quantity changes more than price. Perfectly inelastic means quantity is unaffected by price changes. Determinants that impact elasticity of supply include time period for adjustments, ability to store output, factor mobility, changes in marginal costs, and availability of infrastructure.
Types of elasticity.pptx
This document discusses different types of elasticity including income elasticity of demand, cross elasticity of demand, and price elasticity of supply. It provides examples and interpretations of different elasticity values. Income elasticity indicates how responsive demand is to changes in income. Cross elasticity measures the responsiveness of demand for one good to price changes of another good. Price elasticity of supply indicates how responsive the quantity supplied is to changes in price. Factors like time period and industry characteristics affect elasticity of supply. Elasticity is important for understanding the effects of taxes, production lags, and firm behavior.
4 supply theory
The document discusses the theory of supply. It defines supply as the quantity of a commodity a producer is willing to sell at a particular price during a given time period. Supply is determined by various factors such as the price of the commodity, price of related goods, number of firms, technology, price of factors of production, expected future prices, and government policies. The relationship between price and quantity supplied is shown using supply schedules and supply curves. A change in price results in movement along the curve, while a change in other factors causes a shift in the supply curve.
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Price elasticity supply
- 1. Price Elasticity of Supply EdExcel Economics 1.2.5
- 2. Defining and Measuring Price Elasticity of Supply • If supply is elastic, producers can increase their output without a rise in cost or a time delay • If supply is inelastic, firms find it hard to change their production in a given time period • The formula for price elasticity of supply is: • % change in quantity supplied divided by the % change in price • When Pes > 1, then supply is price elastic • When Pes < 1, then supply is price inelastic • When Pes = 0, supply is perfectly inelastic • When Pes = infinity, supply is perfectly elastic following a change in demand Price elasticity of supply (Pes) measures the relationship between change in quantity supplied and a change in price
- 3. Factors Affecting Price Elasticity of Supply 1. Spare production capacity: If there is plenty of spare capacity then a business can increase output without a rise in costs and supply will be elastic in response to a change in demand 2. Stocks of finished products and components: If stocks of raw materials and finished products are at a high level then a firm is able to respond to a change in demand - supply will be elastic. Perishable goods are often harder/more expensive to store 3. Ease and cost of factor substitution/factor mobility: If capital and labour are occupationally mobile then the elasticity of supply for a product is likely to be higher as resources can be mobilized to supply the extra output e.g. the reallocation of workers to new tasks 4. Time period and production speed: Supply is more price elastic the longer the time that a firm is allowed to adjust its production levels Apply each of the factors mentioned below to the specific industry
- 4. Elastic and Inelastic Supply Curves Elastic supply: Pes > 1 Change in demand can be met without large rise in price Price Qty P2 P1 Q1 Q2 Price Qty P2 P1 Q1 Q2 S1 Inelastic supply: Pes < 1 Supply relatively unresponsive to a change in demand S2 Q2 D1 D2 D1 D2
- 5. Perfectly Elastic and Perfectly Inelastic Supply Curves Perfectly Elastic Supply An increase in demand can be met without any change in market price Price Qty P2 P1 Q1 Price Qty P1 Q1 Q2 S1 Perfectly Inelastic Supply Supply is fixed and cannot respond to a change in market demand S1 D1 D2 D1 D2
- 6. When will market supply be price elastic? A price elastic supply is when PES >1 following a change in demand Supplier has plenty of spare capacity to increase output High stock levels are available to meet rising demand There is a short production time frame to get extra products to market Ease of factor substitution is high – i.e. resources can be reallocated easily
- 7. Topical Applications of Price Elasticity of Supply Shortages of skilled workers in the labour force Supplying complex products with rising consumer demand The supply of new housing to buy and to rent (big UK issue!) Supply response of renewable energy Elasticity of supply of commodities Refining capacity in the oil and gas industries
- 8. Price Elasticity of Supply EdExcel Economics 1.2.5