chap006DescribingSupplyandDemandElasticities(中

Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/IrwinDescribingSupplyandDemand:ElasticitiesChapter6Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-2LaugherCurveQ.What’sthedifferencebetweenaneconomistandabefuddledoldmanwithAlzheimer’s?A.Theeconomististheonewithacalculator.Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-3TheConceptofElasticityElasticityisameasureoftheresponsivenessofonevariabletoanother.Themostcommonlyusedelasticityconceptispriceelasticityofdemand.Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-4PriceElasticityThepriceelasticityofdemandisthepercentagechangeinquantitydemandeddividedbythepercentagechangeinprice.priceinchangePercentagedemandedquantityinchangePercentage=EDCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-5PriceElasticityThepriceelasticityofsupplyistheproportionalchangeinquantitydemandedrelativetotheproportionalchangeinprice.priceinchangePercentagesuppliedquantityinchangePercentage=ESCopyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-6ThingstoNoteAboutElasticityElasticityofdemandisalwaysnegativebecausepriceandquantitydemandedareinverselyrelated—whenpricesrises,quantitydemandedfalls,andviceversa.Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-7ThingstoNoteAboutElasticityDespitethisfact,economistshavedevelopedaconventionandtalkaboutelasticityofdemandasanabsolutevalueofthenumber.Thus,elasticityofdemandistreatedasifitwerepositive.Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-8ClassifyingDemandandSupplyasElasticorInelasticItishelpfultoclassifyelasticitiesbyrelativeresponsiveness.Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-9ElasticDemandandSupplyForelasticpointsoncurves,thepercentagechangeinquantityisgreaterthanthepercentagechangeinprice.E1Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-10ElasticDemandandSupplyCommonsensetellsusthatanelasticsupplymeansthatquantitychangesbyagreaterpercentagethanthepercentagechangeinprice.Thesameholdstruefordemand.Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-11InelasticDemandandSupplyForinelasticpointsoncurves,thepercentagechangeinquantityislessthanthepercentagechangeinprice.E1Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-12InelasticDemandandSupplyCommonsensetellsusthataninelasticsupplymeansthatquantitydoesn'tchangemuchwithachangeinprice.Thesameholdstruefordemand.Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-13WhatInformationPriceElasticityProvidesPriceelasticitygivesofdemandandsupplygivesinformationabouttheexactquantityresponsetoapricechange.Aselasticityincreases,responsivenessofquantitytopricealsoincreases.Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-14ElasticityIsIndependentofUnitsPercentagesallowustohaveameasureofresponsivenessthatisindependentofunits.Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-15ElasticityIsIndependentofUnitsHavingameasureofresponsivenessthatisindependentofunitsmakescomparisonsofresponsivenessofdifferentgoodseasier.Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-16CalculatingElasticitiesTodetermineelasticitydividethepercentagechangeinquantitybythepercentagechangeinprice.Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-17TheEnd-PointProblemTheend-pointproblemisthatthepercentagechangediffersdependingonwhetheryouviewthechangeasariseoradeclineinprice.Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-18TheArcConventionEconomistsusethearcconventiontogetaroundtheend-pointproblem.Thearcelasticitymethodentailsthecalculatingthepercentagechangeatthemidpointoftherange.Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-19TheArcConventionUsingthearcconvention,theaverageofthetwoendpointsareusedasthestartingpointwhencalculatingpercentagechange.21121212P+P)P-(PQQ)Q-(Q=Elasticity½½Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-20GraphsofElasticitiesElasticityofdemand=1.3Quantityofsoftware(inhundredthousands)$262422201816140DBA101214C(midpoint)Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-21GraphsofElasticitiesElasticityofsupply=0.18Quantityofworkers$6.005.505.004.504.003.503.000CBA470(midpoint)480490Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-22GraphsofElasticities(c)SomeexamplesQuantity$10987654321CDFEBA51015202530354045505560E=0.54E=0.67E=4Copyright©2001byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin6-23CalculatingElasticityataPointLetusnowturntoamethodofcalculatingtheelasticityat