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    ECO 533 - Topic 4

    Uploaded by

    Md Taskinur Rahman
    This document discusses elasticity and its applications. It defines elasticity as a measure of responsiveness to changes. It specifically defines price elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price. Factors like substitutes, necessities vs luxuries, and time horizon affect price elasticity of demand. It also discusses computing elasticity, different types of demand curves, how elasticity affects total revenue, and price elasticity of supply. Finally, it provides three examples of how elasticity concepts apply to issues in farming, OPEC oil prices, and drug crime.

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    ECO 533 - Topic 4

    Uploaded by

    Md Taskinur Rahman
    40 views29 pages
    This document discusses elasticity and its applications. It defines elasticity as a measure of responsiveness to changes. It specifically defines price elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price. Factors like substitutes, necessities vs luxuries, and time horizon affect price elasticity of demand. It also discusses computing elasticity, different types of demand curves, how elasticity affects total revenue, and price elasticity of supply. Finally, it provides three examples of how elasticity concepts apply to issues in farming, OPEC oil prices, and drug crime.

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    This document discusses elasticity and its applications. It defines elasticity as a measure of responsiveness to changes. It specifically defines price elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price. Factors like substitutes, necessities vs luxuries, and time horizon affect price elasticity of demand. It also discusses computing elasticity, different types of demand curves, how elasticity affects total revenue, and price elasticity of supply. Finally, it provides three examples of how elasticity concepts apply to issues in farming, OPEC oil prices, and drug crime.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    40 views29 pages

    ECO 533 - Topic 4

    Uploaded by

    Md Taskinur Rahman
    This document discusses elasticity and its applications. It defines elasticity as a measure of responsiveness to changes. It specifically defines price elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price. Factors like substitutes, necessities vs luxuries, and time horizon affect price elasticity of demand. It also discusses computing elasticity, different types of demand curves, how elasticity affects total revenue, and price elasticity of supply. Finally, it provides three examples of how elasticity concepts apply to issues in farming, OPEC oil prices, and drug crime.

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    © All Rights Reserved
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    You are on page 1of 29

    Elasticity and Its Application

    Topic #4

    A Presentation by Md. Abrar Fahad Khan


    Chapter Outline

    The Elasticity of Demand

    The Elasticity of Supply

    Three Applications of Supply, Demand,


    and Elasticity
    The Elasticity of Demand
    A measure of the
    responsiveness of quantity
    Elasticity demanded or quantity
    supplied to a change in one of
    its determinants
    A measure of how much the quantity
    Price Elasticity demanded of a good responds to a
    of Demand change in the price of that good,
    computed as the percentage change in
    quantity demanded divided by the
    percentage change in price
    Determinants of The Price
    Elasticity of Demand
    • Availability of Close Substitutes
    • Necessities versus Luxuries
    • Definition of the Market
    • Time Horizon
    Computing the Price Elasticity of Demand
    Computing the Price Elasticity of
    Demand using The Midpoint Method
    The Variety
    of Demand
    Curves
    The Variety
    of Demand
    Curves
    The Variety
    of Demand
    Curves
    The Variety
    of Demand
    Curves
    The Variety
    of Demand
    Curves
    Total Revenue and the Price Elasticity of Demand
    How Total
    Revenue
    Changes When
    Price Changes
    Other Demand Elasticities

    Income Elasticity of Demand

    • A measure of how much the quantity demanded of


    a good responds to a change in consumers’ income,
    computed as the percentage change in quantity
    demanded divided by the percentage change in
    income

    Cross-Price Elasticity of Demand

    • A measure of how much the quantity demanded of


    one good responds to a change in the price of
    another good, computed as the percentage change
    in quantity demanded of the first good divided by
    the percentage change in price of the second good
    The Elasticity of Supply
    A measure of how much the quantity
    Price Elasticity supplied of a good responds to a
    of Supply change in the price of that good,
    computed as the percentage change in
    quantity supplied divided by the
    percentage change in price
    Computing the Price Elasticity of Supply
    The Variety
    of Supply
    Curves
    The Variety
    of Supply
    Curves
    The Variety
    of Supply
    Curves
    The Variety
    of Supply
    Curves
    The Variety
    of Supply
    Curves
    Three Applications of Supply, Demand, and Elasticity
    Can Good News for Farming Be
    Bad News for Farmers?
    Why Did OPEC Fail to Keep
    the Price of Oil High?
    Does Drug Interdiction Increase or Decrease
    Drug-Related Crime?

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