5_LECTURE
5_LECTURE
Q / Q Q P Q2 Q1 P2 P1
The formula
EP EP
P / P P Q P2 P1 Q2 Q1
Or price
1
Unresponsive quantity demanded of the change in price
Graphic
shapes and
curves
Example (1):
20%.
Percentage change in quatity demanded
Price elasticity of demand
Percentage change in price
Example (1)
%Q
Price elasticity of demand
%P
- 20%
Price elasticity of demand 2
10%
sign
influence the will be elastic. In comparison, for items requiring a small proportion
demand 3. Time and Elasticity: The time period: Period to cope with the
changes that occur in the price of good, The longer the time period
the greater the demand for the commodity has become more
3
Elastic Ed > 1 an increase in price reduces revenue
Total Elastic Ed > 1 a decrease in price increases revenue
Revenue and Inelastic Ed < 1 an increase in price increases revenue
Elasticity of Inelastic Ed < 1 a decrease in price reduces revenue
Demand
unit-elastic Ed = 1 an increase in price does not affect revenue
QX / QX QX PY QX 2 QX 1 PY 2 PY 1
EXY EXY
PY / PY PY QX PY 2 PY 1 QX 2 QX 1
The formula
Point Arc
4
Degree of 1. Perfectly elastic demand Exy = ∞
Example (1):
The price of apples rises from $1.00 per pound to $1.50 per pound.
week to 9,500.
.1714 = 17.14%
substitutes.
Q / Q Q I Q2 Q1 I 2 I1
EI EI
I / I I Q I 2 I1 Q2 Q1
5
* goods Normal and a luxury "Income Elasticity is positive but
Example (1):
Q / Q Q P Q2 Q1 P2 P1
EP EP
P / P P Q P2 P1 Q2 Q1
The formula
"Point " "Arc "
(positive)
6
1. Perfectly elastic supply Es = ∞
Graphic
shapes and
curves
7
1. Time frame for the supply decision
that term
influence It can be said that the firm can increase or decrease its