Econ1-Fall2010-04c-Elasticity-handout

Econ1-Fall2010-04c-Elasticity-handout - supply 6 lasticity...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 1 Principles of Microeconomics 4. Elasticity (C) Fall 2010 Herb Newhouse 1 Readings Ch 4: Elasticity (p 112 – 118) Ch 4: Elasticity (p 112 118) Price Elasticity of Supply Determinants of Supply Elasticity 2 Outline Price elasticity of supply Price elasticity of supply. Determinants of the price elasticity of supply. l i i d l ili Elasticity and volatility. Some other areas in which elasticity is important. 3 The Price Elasticity of Supply price in Δ % supplied quantity in Δ % s ε 0 1 2 3 4
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Extreme Cases P P S S Q Q 5 Determinants of the Elasticity of Supply 1. Flexibility of inputs, mobility of inputs, ability Flexibility of inputs , mobility of inputs , ability to produce substitute inputs : the easier it is to find or make substitute inputs, the higher is the elasticity of supply. 2. Time : the greater is the time horizon, the easier it is for firms to respond to price h d th hi h i th l ti it f changes and the higher is the elasticity of supply. 6 Elasticity and Volatility When supply and demand are relatively inelastic, prices tend to be volatile but the quantity bought and sold in the market
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: supply. 6 lasticity and Volatility Elasticity and Volatility • When supply and demand are relatively inelastic, prices tend be volatile but the quantity bought and sold in the market to be volatile, but the quantity bought and sold in the market is relatively stable. • Example: California energy market. P S Q D 7 lasticity and Volatility Elasticity and Volatility • When supply and demand are relatively elastic, the quantity pp y y , q y bought and sold in the market is relatively volatile, but prices tend to be stable. P S D Q 8 Elasticity is also Important for Understanding . . . • how taxes affect both households and firms. • whether some taxes are more efficient than thers others. • the welfare implications of price controls. • whether minimum wage laws are likely to have a large effect on employment levels. g p y • the supply decisions of monopolists. 9...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern