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Unformatted text preview: Click to edit Master subtitle style 11 Chapter 4 Elasticity Course Outline { 9 3 B 6 C 7 D D B 6 5 6 4 5 9 7 8 D A F 0 C 3 5 C 7 E 5 F C D 7 } Microeconomics { 2 F 1 3 8 6 C 2 2 D 7 B 4 0 F E B 0 1 B 7 8 9 D 9 D 1 F F E D } Introduction is Economics? { C 3 D D 0 A 5 A C F C 5 4 9 D C B C 2 4 F E 6 5 6 7 A 7 C 2 5 } How Markets Work nd and supply { 0 A 9 7 4 7 A F 8 1 F 6 4 1 D 9 B F 9 5 F 1 6 0 2 5 A 9 C 8 7 } Additional Topics holds’ Choice Elasticity ncy and Equity { F C D 7 2 00 6 5 E 4 2 D C 8 D 7 0 A 3 2 C 1 4 8 C 7 A B 1 } Government Actions in Markets { C 3 A E 5 4 8 A 6 8 A 6 4 7 C 9 B E F A 9 1 6 A 6 4 9 5 C E 7 F } Firms and Markets y and Demand references, and Choices onomic Problem put and Costs ct Competition { D 7 2 6 F 9 A B E 5 7 4 5 0 C 9 4 F 8 D C 2 E 6 B 1 C 4 2 C } Monopoly istic Competition { F 3 C 8 4 3 0 B C 0 B E 4 7 C A D 2 C 8 2 1 6 1 E 6 1 2 4 0 9 } Oligopoly 22 Lecture Outline I. Price elasticity of Demand 1. Definition, calculation and examples 2. Price elasticity along a linear demand curve 3. Elasticity and expenditure/revenue 4. Point elasticity vs. Arc elasticity 5. Factors influencing price elasticity of demand II. Other elasticity of Demand 1. Income elasticity of demand 2. Cross elasticity of demand III. Price elasticity of supply IV. Application examples 33 44 Questions n If the government increase the tax rate, its tax revenue will certainly increase. Is it true? n When managers are asked to raise prices, their most frequent worry is: “But my sales would drop!” The real issue is: How sensitive are buyers to price changes? 55 I. Price Elasticity of Demand q In Figure 4.1a, a change in supply brings a small increase in the quantity demanded and a large fall in price. 66 I. Price Elasticity of Demand q In Figure 4.1b, a change in supply brings a large increase in the quantity demanded and a small fall in price. 77 I.1 Price Elasticity of Demand n Measures responsiveness of demand to changes in its price. n Price elasticity of demand= % change in quantity demanded % change in price 88 I.1 Price Elasticity of Demand ∆Q/ Q n eP= ∆P/ P n Two ways of calculation q Point Elasticity: use the initial Q and P; works for small changes q Arc Elasticity: use the average of the initial and new quantity and average price. 99 I.1 Price Elasticity of DemandI....
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This note was uploaded on 06/16/2011 for the course ECON 110 taught by Professor Tan during the Spring '07 term at HKUST.
 Spring '07
 Tan
 Economics, Microeconomics

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