台湾民间消费(新台币百万元).ppt

ELASTICITY
4
CHAPTER
Objectives
After studying this chapter, you will be able to
Define, calculate, and explain the factors that influence the price elasticity of demand
Define, calculate, and explain the factors that influence the cross elasticity of demand and the e elasticity of demand
Define, calculate, and explain the factors that influence the elasticity of supply
Tough Times in the Recording Industry
More and more people are illegally downloading music rather than paying $12 for a CD.
CD producers are loosing revenue and some of them are trying bat the problem by slashing the price of a CD.
Will this strategy work?
Can lower priced CDs beat illegal downloads, bring greater revenue to the recording industry and artists, and help to promote the social interest?
The concept of elasticity helps to answer these questions.
Price Elasticity of Demand
In Figure , a change in supply brings a small increase in the quantity demanded and a large fall in price.
Price Elasticity of Demand
In Figure , a change in supply brings a large increase in the quantity demanded and a small fall in price.
Price Elasticity of Demand
The contrast between the two es in Figure highlights the need for a measure of the responsiveness of the quantity demanded to a price change.
Price Elasticity of Demand
The price elasticity of demand is a units-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buyers’ plans remain the same.
Calculating Elasticity
The price elasticity of demand is calculated by using the formula:
Percentage change in quantity demanded
Percentage change in price
Price Elasticity of Demand
To calculate the price elasticity of demand:
We express the change in price as a percentage of the average price—the average of the initial and new price,
and we express the change in the quantity demanded as a percentage of the average quantity demanded—the average of the initial and new qu