国际贸易Chap05.ppt

Elasticity and Its Application Chapter 5 Elasticity . . . … is a measure of how much buyers and sellers respond to changes in market conditions  … allows us to analyze supply and demand with greater precision. Price Elasticity of Demand Price elasticity of demand is the percentage change in quantity demanded given a percent change in the price.  It is a measure of how much the quantity demanded of a good responds to a change in the price of that good. Determinants of Price Elasticity of Demand Necessities versus Luxuries Availability of Close Substitutes Definition of the Market Time Horizon Determinants of Price Elasticity of Demand Demand tends to be more elastic : if the good is a luxury. the longer the time period. the larger the number of close substitutes. the more narrowly defined the market. Computing the Price Elasticity of Demand The price elasticity of demand is computed as the percentage change in the quantity demanded divided by the percentage change in price. Computing the Price Elasticity of Demand Computing the Price Elasticity of Demand Using the Midpoint Formula The midpoint formula is preferable when calculating the price elasticity of demand because it gives the same answer regardless of the direction of the change. Computing the Price Elasticity of Demand Ranges of Elasticity Inelastic Demand Quantity demanded does not respond strongly to price changes. Price elasticity of demand is less than one. Elastic Demand Quantity demanded responds strongly to changes in price. Price elasticity of demand is greater than one. Computing the Price Elasticity of Demand Ranges of Elasticity Perfectly Inelastic Quantity demanded does not respond to price changes. Perfectly Elastic Quantity demanded changes infinitely with any change in price. Unit Elastic Quantity demanded changes by the same percentage as the price. A Variety of Demand Curves Perfectly Inelastic Demand - Elasticity equals 0 Inelastic Demand - Elasticity is less than 1 Unit Elastic