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Terminology Numerical Measure Verbal Discription

The document provides a nomenclature table that defines different levels of demand elasticity on a numerical and verbal scale. It then provides an example calculation of demand elasticity using a table that shows the original price and quantity, new price and quantity, and computed average price and quantity for 3 goods. It demonstrates how to calculate the percentage change in price and quantity demanded, and then uses those values to compute the elasticity of demand for each good.

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John Delacruz
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67 views3 pages

Terminology Numerical Measure Verbal Discription

The document provides a nomenclature table that defines different levels of demand elasticity on a numerical and verbal scale. It then provides an example calculation of demand elasticity using a table that shows the original price and quantity, new price and quantity, and computed average price and quantity for 3 goods. It demonstrates how to calculate the percentage change in price and quantity demanded, and then uses those values to compute the elasticity of demand for each good.

Uploaded by

John Delacruz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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NOMENCLATURE TABLE OF DEMAND ELASTICITY

TERMINOLOGY NUMERICAL MEASURE VERBAL DISCRIPTION


1. Perfectly/ completely Zero QD does not change as
inelastic price changes
2. Inelastic Greater than zero but less QD changes by a
than one smaller percentage as
does price
3. Unit Elasticity One QD changes by exactly
the same percentage as
does price
4. Elastic Greater than one but less QD changes by a larger
than infinity a larger percentage as
does price
5. Perfectly/ absolutely Infinity Purchasers are
Elastic prepared to buy all they
can attain and none at
all at an even slightly
higher price.
EXAMPLE:

OP= Original Price OQ= Original Quantity

NP= New Price NQ= New Quantity

AP= Average Price AQ= Average Quantity

GOODS OP NP AP OQ NQ AQ
A 5 4 4.5 800 900 850
B 5 4 4.5 800 1,000 900
C 5 4 4.5 800 1,200 1,000

COMPUTATION FOR AVERAGE PRICE

AP= OP+NP A. AP= 5+4/2=4.5

AP B. AP= 5+4/2=4.5

C. AP= 5+4/2=4.5

COMPUTATION FOR AVERAGE QUANTITY

AQ= OQ+NQ A. AQ= 800+900/2=850

AQ B. AQ= 800+1,000/2= 900

C. AQ= 800+1,200/2= 1,000

GOODS % in P % in QD ED
A 22.22% 11.76% 0.53%
B 22.22% 22.22% 1%
C 22.22% 40% 1.80%

COMPUTATION FOR PERCENTAGE CHANGE IN PRICE (% in P)

% in P= OP-NP A. 5-4
X 100 X 100 = 22.22
AP 4.5

B. 5-4
X 100 = 22.22
4.5

C. 5-4
X 100 = 22.22
4.5
COMPUTATION FOR PERCENTAGE CHANGE IN QUANTITY DEMAND (% in QD)

A. 900-800
% in QD= NQ-OQ
X 100 = 11.76
X 100 850
AQ
B.1,000-800
X 100 = 22.22
900

C. 1,200-800
X 100 = 40
1,000

COMPUTATION FOR ELASTICITY DEMAND (ED)

A. 11.76
ED= % in QD = 0.53
22.22
% in P
B. 22.22
=1
22.22

C. 40
= 1.80
22.22

0
200 400 600 800 1000 1,200

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