中密苏里州立大学：《经济学原理——曼昆经济学原理》课程PPT教学课件（英文版）Chapter 5 Elasticity and Its Application

18 Elasticity and Its N Application M Chapter 5 Copyright C 2001 by Harcourt, Inc All rights reserved. Requests for permission to make copies of any part of the work should be mailed to Permissions Department, Harcourt College Publishers 6277 Sea harbor Drive. Orlando Florida 32887-6777

Elasticity and Its Application Chapter 5 Copyright © 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College Publishers, 6277 Sea Harbor Drive, Orlando, Florida 32887-6777

Elasticity is a measure of how much buyers and sellers respond to changes in market conditions allows us to analyze supply and demand with greater precision. Harcourt, Inc. items and derived items copyright o 200l by harcourt, Inc

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Elasticity . . . … is a measure of how much buyers and sellers respond to changes in market conditions … allows us to analyze supply and demand with greater precision

Price Elasticity of Demand Price elasticity of demand is the percentage change in quantity demanded given a percent change in the price. It is a measure of how much the quantity demanded of a good responds to a change in the price of that good Harcourt, Inc. items and derived items copyright o 200l by harcourt, Inc

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Price Elasticity of Demand Price elasticity of demand is the percentage change in quantity demanded given a percent change in the price. It is a measure of how much the quantity demanded of a good responds to a change in the price of that good

Determinants of Price Elasticity of Demand Necessities versus uxuries Availability of close substitutes Definition of the Market Time horizon Harcourt, Inc. items and derived items copyright o 200l by harcourt, Inc

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Determinants of Price Elasticity of Demand Necessities versus Luxuries Availability of Close Substitutes Definition of the Market Time Horizon

Determinants of Price Elasticity of Demand Demand tends to be more elastic if the good is a luxury. the longer the time period the larger the number of close substitutes the more narrowly defined the market. Harcourt, Inc. items and derived items copyright o 200l by harcourt, Inc

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Determinants of Price Elasticity of Demand Demand tends to be more elastic : if the good is a luxury. the longer the time period. the larger the number of close substitutes. the more narrowly defined the market

Computing the Price Elasticit of demand The price elasticity of demand is computed as the percentage change in the quantity demanded divided by the percentage change in price Percentage Change Price Elasticity of Demand= in Quantity Demanded Percentage Change in Price Harcourt, Inc. items and derived items copyright o 200l by harcourt, Inc

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Computing the Price Elasticity of Demand The price elasticity of demand is computed as the percentage change in the quantity demanded divided by the percentage change in price. Price Elasticity of Demand = Percentage Change in Quantity Demanded Percentage Change in Price Price Elasticity of Demand = Percentage Change in Quantity Demanded Percentage Change in Price

Computing the Price Elasticit of demand Price elasticityof demand Percentage change in quatity demanded Percentage change in price Example: If the price of an ice cream cone increases from $2.00 to $2.20 and the amount you buy falls from 10 to 8 cones then your elasticity of demand would be calculated as. (10-8) 100 10 20 percent 220-2.00)×10010 percent/ 2.00 Harcourt, Inc. items and derived items copyright o 200l by harcourt, Inc

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Computing the Price Elasticity of Demand Percentage change i n price Percentage change i nquatity demanded Price elasticityof demand = Example: If the price of an ice cream cone increases from $2.00 to $2.20 and the amount you buy falls from 10 to 8 cones then your elasticity of demand would be calculated as: 2 10 percent 20 percent 100 2 00 2 20 2 00 100 10 10 8 = =  −  − . ( . . ) ( )

Computing the Price Elasticity of Demand Using the Midpoint Formula The midpoint formula is preferable when calculating the price elasticity of demand because it gives the same answer regardless of the direction of the change Price Elasticity of Demand =(Q2-Q1/(Q2+Q1)/2J (P2-P1)[(P2+P1)/2] Harcourt, Inc. items and derived items copyright o 200l by harcourt, Inc

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Computing the Price Elasticity of Demand Using the Midpoint Formula The midpoint formula is preferable when calculating the price elasticity of demand because it gives the same answer regardless of the direction of the change. (P P )/[(P P )/2] (Q Q )/[(Q Q )/2] Price Elasticity of Demand= 2 1 2 1 2 1 2 1 − + − +

Computing the Price Elasticit of demand Price Elasticity of Demand=(Q2-Q1)/[(Q2+Q1)/2 (P2-P1)P2+P12] Example: If the price of an ice cream cone increases from $2.00 to $2.20 and the amount you buy falls from 10 to 8 cones the your elasticity of demand, using the midpoint formula, would be calculated as: (10-8) 10+8)/222 percent 2.32 (2.20-2009. percent (200+220)/2 Harcourt, Inc. items and derived items copyright o 200l by harcourt, Inc

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Computing the Price Elasticity of Demand Example: If the price of an ice cream cone increases from $2.00 to $2.20 and the amount you buy falls from 10 to 8 cones the your elasticity of demand, using the midpoint formula, would be calculated as: 2.32 9.5 22 (2.00 2.20)/ 2 (2.20 2.00) (10 8)/ 2 (10 8) = = + − + − percent percent (P P )/[(P P )/2] (Q Q )/[(Q Q )/2] Price Elasticity of Demand= 2 1 2 1 2 1 2 1 − + − +

Ranges of Elasticity Inelastic demand Quantity demanded does not respond strongly to price changes. Price elasticity of demand is less than one. Elastic demand Quantity demanded responds strongly to changes In price. Price elasticity of demand is greater than one. Harcourt, Inc. items and derived items copyright o 200l by harcourt, Inc

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Ranges of Elasticity Inelastic Demand Quantity demanded does not respond strongly to price changes. Price elasticity of demand is less than one. Elastic Demand Quantity demanded responds strongly to changes in price. Price elasticity of demand is greater than one