KW_Chapter05.ppt

CHAPTER 5 Elasticity Review Slides PowerPoint? Slides  by Can Erbil ? 2004 Worth Publishers, all rights reserved What you will learn in this chapter: Definition of elasticity price elasticity of demand income elasticity of demand cross price elasticity of demand price elasticity of supply Factors that influence the size of elasticity. How elasticity affects the incidence of a tax, and who bears its burden? Elasticities of Supply and Demand Generally, elasticity is a measure of the sensitivity of one variable to another. It tells us the percentage change in one variable in response to percent change in another variable. Defining and Measuring Elasticity The price elasticity of demand is the ratio of the percent change in the quantity demanded to the percent change in the price as we move along the demand curve. Elasticities of Supply and Demand The price elasticity of demand is: 需求价格弹性 Elasticities of Supply and Demand So the price elasticity of demand is also: Using the Midpoint Method（中值法） to Calculate Elasticities Some Estimated Price Elasticities of Demand Good Price elasticity Inelastic demand Eggs 0.1 Beef 0.4 Stationery 0.5 Gasoline 0.5 Elastic demand Housing 1.2 Restaurant meals 2.3 Airline travel 2.4 Foreign travel 4.1 Interpreting the Price Elasticity of Demand: How Elastic Is Elastic?Two Extreme Cases of Price Elasticity of Demand perfectly inelastic（完全无弹性） perfectly elastic（完全有弹性） Elasticities of Supply and Demand If |EP| 1, the percent change in quantity is less than the percent change in price. We say the demand is price inelastic. Interpreting the Price Elasticity of Demand: How Elastic Is Elastic? Demand is: elastic（富有弹性） if the price elasticity of demand is greater than 1, Inelastic（弹性不足） if the price elasticity of demand is less than 1, and unit-elastic（单位弹性） if the price elasticity of demand is exactly 1. Elasticity and Total Revenue ■ A price effect（价格效应）: After a price increase, each