Chapter

3
Demand
Elasticities

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

EQUATION 3.1 – 3.2 Price elasticity of demand(eP)

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.1 Price Elasticity and the Movement Along a Demand Curve

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

TABLE 3.1 Values of Price Elasticity of Demand Coefficients

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.2 Elastic Demand and Total Revenue

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.3 Inelastic Demand and Total Revenue

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

EQUATION 3.3 Arc Price Elasticity of Demand

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

EQUATION 3.4 Point Price Elasticity of Demand

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

EQUATION 3.5 Linear Demand Function

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

TABLE 3.2 Numerical Example of Demand, Total Revenue, Average Revenue, and Marginal Revenue
Functions

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

TABLE 3.3 Numerical Values for the Functional Relationships in Table 3.2

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

TABLE 3.4 Arc Price Elasticity Versus Point Price Elasticity Calculations (Data from Tables 3.2 and
3.3)

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.4 Demand and Marginal Revenue Functions

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.5 The Total Revenue Function

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

TABLE 3.5 Relationships for a Linear Downward Sloping Demand Curve

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.6 Vertical Demand Curve

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.7 Horizontal Demand Curve

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

TABLE 3.6 Income Elasticity and Cross-Price Elasticity of Demand Coefficients

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

TABLE 3.7 Estimates of Demand Elasticities

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

TABLE 3.7 Estimates of Demand Elasticities

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

TABLE 3.8 Elasticity Coefficients from Marketing Literature

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.A1 Derivation of a Consumer Indifference Curve

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.A2 Illustration of Consumer Indifference Curves

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.A3 A Convex Indifference Curve

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

EQUATION 3.A1 The Budget Constraint

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.A4 The Budget Line

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.A5 Change (Increase) in Income (Prices Constant)

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.A6 Change (Decrease) in the Price of Good X (All Else Constant)

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.A7 The Consumer Maximization Problem

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.A8 Consumer Equilibrium with a Change in Income (Two Normal Goods)

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.A9 Consumer Equilibrium with a Change in Income (One Normal and One Inferior Good)

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.A10 Consumer Equilibrium with a Decrease in the Price of Good X (Inelastic Demand for X)

© 2014 Pearson Education, Inc.

 Chapter 3
Demand Elasticities

FIGURE 3.A11 Consumer Equilibrium with a Decrease in the Price of Good X (Elastic Demand for X)

© 2014 Pearson Education, Inc.