【文章內(nèi)容簡介】 1998 indicating a large increase in demand.l The real price for copper has remained relatively constant.49Chapter 1S1998D1998D1900S1900 S1950D1950LongRun Path ofPrice and ConsumptionChanges In Market EquilibriumQuantity Price50Chapter 1n Conclusionl Decreases in the costs of production have increased the supply by more than enough to offset the increase in demand.Changes In Market Equilibrium51Chapter 1n Observationl To accurately predict the future price of a product or service, it is necessary to consider the potential change in supply and demand.l 1970 predictions for oil and other minerals proved incorrect because they only considered the demand side of the market.Changes In Market Equilibrium52Chapter 1Elasticities of Supply and Demandn Generally, elasticity is a measure of the sensitivity of one variable to another.n It tells us the percentage change in one variable in response to a one percent change in another variable.53Chapter 1Elasticities of Supply and Demandn Measures the sensitivity of quantity demanded to price changes.l It measures the percentage change in the quantity demanded for a good or service that results from a one percent change in the price.Price Elasticity of Demand54Chapter 1Elasticities of Supply and Demandn The price elasticity of demand is:55Chapter 1Elasticities of Supply and Demandn The percentage change in a variable is the absolute change in the variable divided by the original level of the variable.Price Elasticity of Demand56Chapter 1Elasticities of Supply and Demandn So the price elasticity of demand is also:Price Elasticity of Demand57Chapter 1Elasticities of Supply and Demandn Interpreting Price Elasticity of Demand Values1) Because of the inverse relationship between P and Q。 EP is negative.2) If EP 1, the percent change in quantity is greater than the percent change in price. We say the demand is price elastic.58Chapter 1Elasticities of Supply and Demandn Interpreting Price Elasticity of Demand Values3) If EP 1, the percent change in quantity is less than the percent change inprice. We say the demand is price inelastic.59Chapter 1Elasticities of Supply and Demandn The primary determinant of price elasticity of demand is the availability of substitutes.l Many substitutes demand is price elasticl Few substitutes demand is price inelasticPrice Elasticity of Demand60Chapter 1The Classification of Price ElasticityinelasticityUnitary elasticity elasticityPerfectly elasticityPerfectly inelasticity61Chapter 1BAOCDEIf the demand curve is a linear demand curve Q = a – b*PPrice Elasticity of demand62Chapter 1Price Elasticities of DemandQPriceQ = 8 2PEp = 1Ep = 0The lower portion of a downward sloping demand curve is less elasticthan the upper portion.4824Linear Demand CurveQ = a bPQ = 8 2P63Chapter 1Price Elasticities of DemandDP*Quantity Price Infinitely Elastic Demand64Chapter 1Price Elasticities of DemandQ* Quantity PriceCompletely Inelastic Demand65Chapter 1Point and Arc ElasticityThe price elasticity at a particular point is point elasticity.Some time we want to calculate a price elasticity over some portion of the demand curve. we can use the arc elasticity of demand. Arc Elasticity Ep = (ΔQ/ΔP)(P*/Q*) Here P* is an average of the two prices。 Q* is an average of the two quantities.66Demand and ElasticityPrice Elasticity of demandP0 QpApBqA qBABArc Elasticity67Demand and ElasticityExamplen The demand curve for frozen pizzas is given by Qd=82P, what is the demand elasticity at P=0? P=2? And P=4?68Chapter 1Examplen If you are the CEO of the pany, how do you decide to raise the price of pany product given all the other factors are constant?69Chapter 1Elasticities of Supply and Demandn Ine elasticity of demand measures the percentage change in quantity demanded resulting from a one percent change in ine.Other Demand Elasticities70Chapter 1Elasticities of Supply and Demandn The ine elasticity of demand is:Other Demand Elasticities71Chapter 1Elasticities of Supply and Demandn Cross elasticity of demand measures the percentage change in the quantity demanded of one good that results from a one percent change in the price of another good.n For example consider the substitute goods, butter and margarine.Other Demand Elasticities72Chapter 1Elasticities of Supply and Demandn The cross elasticity of demand is:n The cross elasticity for substitutes is positive, while that for plements is negative.73Chapter 1Elasticities of Supply and Demandn Price elasticity of supply measures the percentage change in quantity supplied resulting from a 1 percent change in price.n The elasticity is usually positive because price and quantity supplied are directly related.Elasticities of Supply74Chapter 1Elasticities of Supply and Demandn We can refer to elasticity of supply with respect to interest rates, wage rates, and the cost of raw materials.Elasticities of Supply75Chapter 1ExampleIn the past 5 years, the MBA tuition of Tsinghua University has doubled, neither the number nor quality of students applying has decreased, so The demand for admission of Tsinghua MBA is pletely price inealastic? Would you accept this argument?76Chapter 1QuantityPriceS1998S1999S2023D1998D1999D202377Chapter 1Elasticities of Supply and Demandn 1981 Supply Curve for WheatlQS = 1,800 + 240Pn 1981 Demand Curve for WheatlQD = 3,550 266PThe Market for Wheat78Chapter 1Elasticities of Supply and Demandn Equilibrium: Q S = Q DThe Market for WheatChapter 2 Slide 79Chapter 1Elasticities of Supply and DemandThe Market