经济学EconomicsforToday3E5备课讲稿.pptVIP

* Elasticity coefficients At introductory levels, it is conventional to ignore the minus sign that should result from calculations. The elasticity coefficient could be: elastic (Ed 1) inelastic (Ed 1) unitary elastic (Ed = 1) * Elastic demand (Ed 1) Elastic demand indicates that the percentage change in quantity demanded is greater than the percentage change in price. This means consumers are sensitive to the price change. * Example of elastic demand A rock group decreases its prices from $30 to $20, and quantity demanded rises from 10 000 to 30 000 tickets. Using the percentage change method: * Example calculations Using the midpoint formula: Ed = 2.5 – demand is price elastic. Elastic demand coefficients * Other coefficients Inelastic: When the percentage change in the quantity demanded is smaller than the percentage change in the price. Consumers are not sensitive to the price change. Unitary elastic: When the percentage change in the quantity demanded is equal to the percentage change in price. Other coefficients (cont.) * * The total revenue test Total revenue is the revenue a firm earns from sales – it is equal to price multiplied by quantity demanded. Depending on the elasticity coefficient, a decrease in price may lead to: increase in total revenue (elastic) decrease in total revenue (inelastic) no change in total revenue (unitary). * Perfectly elastic demand perfectly inelastic demand Perfectly elastic demand: a small percentage change in price brings about an infinite percentage change in the quantity demanded. Perfectly inelastic demand: the quantity demanded does not change as the price rises. Perfectly elastic demand perfectly inelastic demand * * Variations along a straight-line demand curve The price elasticity of demand varies as we move along the demand curve. Any straight line demand curve has three ranges: a price elastic range (at high prices) a unitary elastic point a price inelastic range (at low prices). Variations along a strai