Unit three Price Elasticities of Demand and Supply.pptVIP

Unit three Price Elasticities of Demand and Supply Part One basic concepts and theories  1. Price elasticity in demand Some goods which are bought readily if their prices are low but are bought in much smaller quantities if the prices rise. Effect of a price rise on the demand for a price elastic good 2.Price inelasticity in demand Some goods are so much in demand that however much prices rise, the demand for them remains the same or drop off only slightly. Effect of a price rise on the demand for a price inelastic good 3. Price elasticity of demand the relative change in quantity demanded in response to a small change in price. Price elasticity of supply the relative change in quantity supplied in response to a small change in price The law of diminishing marginal utility It means that even with decreasing prices there comes a time when the consumers has had enough and will not buy even more unit of the item. A typical elastic demand curve :It slope downwards from left to right due to the aspect of consumer demand as well as the law of demand. Why having more means less satisfaction? 6. Consumer sovereignty It means that the consumers are supreme and their decisions are all—important in deciding what shall be produced and how production shall be distributed. Part two while-reading 1.Is the concept of price elasticity of demand important for sellers? Why or why not? 2. Is knowledge of the demand elasticity of an item important to producers? Why or why not ? 3. Rank the elasticity of demand among the following goods.(pg37,EX5) 4. Explain in detail how price influences demand. 5. what factors can influence demand or supply and elasticity? Part three additional exercise for translation 1.Necessities,such as basic foodstuffs, normally have very inelastic demand curves, meaning that their quantities demanded are not very responsive to changes in their prices. In contrast, many luxury goods, such as restaurant meals, have rather elasti