Introduction to economics

Август 2, 2022

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Экономика
Introduction to economics

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2. Elasticity D
3. Quantity Price O Q2 Q1 P1 P2 b S2 S1 D a The effect on price
4. Price elasticity of demand The responsiveness of quantity demanded to a change in price One of
5. Price Elasticity of Demand Measures the responsiveness of quantity demanded to changes in a good’s own
6. Price Elasticity of Demand Determinants of price elasticity of demand number and closeness of substitute goods
7. Measuring the Price Elasticity of Demand D
9. 40% rise in price of oil causes a 10% fall in quantity demanded -10%/40% = -0.25
10. Interpreting the figure for elasticity of demand Demand curves generally slope downward Price and quantity change
11. Interpreting the figure for elasticity of demand
12. Price Elasticity of Demand and Consumer Expenditure One of the most important applications of price elasticity
13. Price Elasticity of Demand and Consumer Expenditure Defining total consumer expenditure TE = P × Q
14. Example If consumers buy 3 million units (Q) at a price of £2 per unit (P)
15. Total consumer expenditure will be the same as the total revenue (TR) received by firms from
16. P(£) Q (millions of units per period of time) 0 a D Total Expenditure
17. P(£) Q (millions of units per period of time) 0 a D Elastic demand between two
18. Warning Elasticity will generally vary along the length of the curve Common mistake to think of
20. Special Cases
21. Review https://www.youtube.com/watch?v=-b7xlINQ-zg End of Session 1
22. Price Elasticity of Supply Price elasticity of supply is a measure used in economics to show
23. Price Elasticity of Supply Measuring price elasticity of supply %ΔQS / %ΔP elastic and inelastic supply
24. The effect of imposing tax on goods Government intervention in the markets Indirect taxes, VAT, excise
25. Introduction to Economics, Sloman, J., 2012. 78 Economics. 8th Ed. Harlow: Pearson
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Elasticity

D

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Quantity
Price
O
Q2
Q1
P1
P2
b
S2
S1
D
a
The effect on price of a shift in supply depends on

the responsiveness of demand to a change in price.

Market supply and demand

Слайд 4

Price elasticity of demand
The responsiveness of quantity demanded to a change

in price
One of the most important concepts in economics
Price elasticity of demand varies enormously from product to product ( oil & cabbage)

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Price Elasticity of Demand
Measures the responsiveness of quantity demanded to changes

in a good’s own price.
The price elasticity of demand is the percent change in quantity demanded divided by the percent change in price that caused the change in quantity demanded.

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Price Elasticity of Demand
Determinants of price elasticity of demand
number and closeness

of substitute goods
proportion of income spent on the good
the time period

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Measuring the Price Elasticity of Demand

D

Слайд 8

Слайд 9

40% rise in price of oil causes a 10% fall in

quantity demanded
-10%/40% = -0.25

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Interpreting the figure for elasticity of demand
Demand curves generally slope downward
Price

and quantity change in opposite directions
A rise in price ( a positive figure) will cause a fall in the quantity demanded ( a negative figure)
A fall in price will cause a rise in quantity demanded
When working out price elasticity of demand we either divide a negative figure by a positive figure
Or a positive figure by a negative figure
Either way end up with a negative figure

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Interpreting the figure for elasticity of demand

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Price Elasticity of Demand and Consumer Expenditure
One of the most important

applications of price elasticity of demand concerns total amount of money consumers spend on a product
Total Consumer Expenditure - TE
Price multiplied by Quantity
TE = P x Q

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Price Elasticity of Demand and Consumer Expenditure
Defining total consumer expenditure
TE =

P × Q
Illustrating TE graphically
Effects of a price change: elastic demand
P rises: TE falls
P falls: TE rises

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Example
If consumers buy 3 million units (Q) at a price of

£2 per unit (P)
Total is £6 million (TE)

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Total consumer expenditure will be the same as the total revenue

(TR) received by firms from the sale of the product (before taxes and other deductions)

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P(£)
Q (millions of units per period of time)
0
a
D
Total Expenditure

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P(£)
Q (millions of units per period of time)
0
a
D
Elastic demand between two

points

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Warning
Elasticity will generally vary along the length of the curve
Common mistake

to think of the elasticity of the whole curve
2 exceptions - special cases – 2 curves on one diagram

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Special Cases

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Review
https://www.youtube.com/watch?v=-b7xlINQ-zg
End of Session 1

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Price Elasticity of Supply
Price elasticity of supply is a measure used

in economics to show the responsiveness, or elasticity, of the quantity supplied of a good or service to a change in its price.

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Price Elasticity of Supply
Measuring price elasticity of supply %ΔQS / %ΔP
elastic

and inelastic supply
Determinants of price elasticity of supply
amount that costs rise as output increases
time period

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The effect of imposing tax on goods
Government intervention in the markets
Indirect

taxes, VAT, excise duties on cigarettes petrol & alcohol
May be fixed per unit sold ( specific tax)
Asa % of the price at each stage of production (Ad valorem tax)

Слайд 25