Elasticity of Demand and Supply：需求弹性和供给弹性.pptVIP

Elasticity of Demand and Supply Chapter 5 Price Elasticity of Demand Price elasticity of demand measures how responsive consumers are to price change; elasticity is another word for responsiveness Price elasticity of demand = Percentage change in quantity demanded / Percentage change in price Exhibit 1: Demand Curve for Tacos Price Elasticity of Demand Generalize the price elasticity formula Price Elasticity of Demand Because the average quantity and average price are used as a base for computing percent change, the same elasticity results whether going from the higher price to the lower price or the other way around Since the focus is on the percent change, we need not be concerned with how output or price is measured Price Elasticity of Demand Because price and quantity demanded are inversely related, the price elasticity of demand has a negative sign This tends to be cumbersome, thus it is commonplace to discuss the price elasticity of demand as an absolute value ? positive number For example, absolute value of the elasticity for tacos computed earlier will be referred to as 0.5 rather than –0.5 Categories of Price Elasticity Three general categories Percent change in quantity demanded is smaller than the percent change in price, the price elasticity has an absolute value between 0 and 1.0 ? demand is inelastic ? quantity demanded is relatively unresponsive to a change in price Percent change in quantity demanded just equals the percent change in price ? a price elasticity with an absolute value of 1.0 ? unit-elastic demand Percent change in quantity demanded exceeds the percent change in price, the price elasticity has an absolute value exceeding 1.0 ? demand is said to be elastic ? quantity is responsive to changes in price Elasticity and Total Revenue Total revenue (TR) is the price (p) multiplied by the quantity demanded (q) at that price ? TR = p x q What happens to total revenue when price decreases? Lower price ? producers get less for each unit sold