ECON 503: Chapter 3 Quantitative Demand Analysis Dr. Fida Karam Gulf University for Science and Technology Department of Economics and Finance Office N1-115 email: karam.f@gust.edu.kw Dr. Fida Karam (GUST) Quantitative Demand Analysis 1 / 19 Introduction The shapes of demand and supply curves influence how much shifts in demand or supply affect market equilibrium. • Shape is best summarized by elasticity. • Elasticity indicates how responsive one variable is to a change in another
Premium Supply and demand Price elasticity of demand Elasticity
Demand Function Consumer’s demand for an item is the result of a wide variety of forces. In mathematical terms‚ the demand function for product X can be symbolized as where = total quantity demanded of product X (in units) = price of product X = measure of the prices of the brands and products that are substitutes for product X = measure of the prices of the brands and products that are complementary to product X = index of consumers’ tastes and preferences = level of advertising
Premium Supply and demand Price elasticity of demand Elasticity
Exercise 6 Solution Chapter 6 Elasticity: The Responsiveness of Demand and Supply 6.1 The Price Elasticity of Demand and Its Measurement 1) Price elasticity of demand measures A) how responsive suppliers are to price changes. B) how responsive sales are to changes in the price of a related good. C) how responsive quantity demanded is to a change in price. D) how responsive sales are to a change in buyers’ incomes. Answer: C Comment: Recurring Diff: 1 Page
Premium Supply and demand Price elasticity of demand Elasticity
Elasticity and Its Application Chapter 5 Copyright © 2001 by Harcourt‚ Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department‚ Harcourt College Publishers‚ 6277 Sea Harbor Drive‚ Orlando‚ Florida 32887-6777. 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. Harcourt‚ Inc. items and derived
Premium Supply and demand Price elasticity of demand
price elasticity of demand and its calculation. The price elasticity of demand measures the responsiveness of quantity demanded to changes in price; it is calculated by dividing the percentage change in quantity demanded by the percentage change in price. 2. Explain what it means for demand to be price inelastic‚ unit price elastic‚ price elastic‚ perfectly price inelastic‚ and perfectly price elastic. Demand is price inelastic if the absolute value of the price elasticity of demand
Premium Supply and demand Consumer theory Price elasticity of demand
First section: Information Price elasticity of demand Elasticity is a term widely used in economics to denote the “responsiveness of one variable to changes in another.” In proper words‚ it is the relative response of one variable to changes in another variable. The phrase “relative response” is best interpreted as the percentage change. Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness‚ or elasticity‚ of the quantity demanded of a good or service
Premium Supply and demand Price elasticity of demand
Price elasticity of demand is defined as how demand changes as a result of a change in price. It can be said that if a reduction in price leads to an increase in demand then demand is relatively elastic. Elasticity is usually negative. There is an alternative scenario where demand will increase as price does so too. This happens only in the case of Giffen goods‚ where elasticity is positive. The formula for price elasticity of demand is: Percentage Change in Quantity Demanded Percentage Change
Premium Consumer theory Supply and demand Price elasticity of demand
demanded equals the percentage change in price‚ then demand is a. inelastic. b. unit elastic. c. elastic. d. irrelevant. e. undefined. 3. Which of the following statements is correct? a. The demand for New Balance shoes is more elastic than the demand for shoes in general. b. The demand for salt is very elastic. c. The demand for luxuries is less elastic than the demand for necessities. d. The demand for a narrowly defined good is less elastic than the demand for a more broadly defined good. e. The larger
Premium Supply and demand Consumer theory Price elasticity of demand
increase (or fall) in DEMAND for one leads to a fall (or increase) in demand for the other – Coca-Cola and Pepsi‚ perhaps. Cross Price Elasticity of Demand In economics‚ the cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good. ([QDemand(NEWX) - QDemand(OLDX)] / QDemand(OLDY))/ [Price(NEWY5) - Price(OLDY)] / Price(OLDY) Normal goods When average INCOME increases‚ the DEMAND for normal goods
Premium Supply and demand Consumer theory Price elasticity of demand
Short Paper: Demand Elasticity Jessie Carrollo Centenary College of New Jersey Price elasticity is important because it helps companies to determine how much the price of a good or service can fluctuate before it affects demand. A product or service is determined to be inelastic when a change in price will not dramatically affect the consumer’s demand on that product or service. Inelasticity is generally determined when a good’s
Premium Consumer theory Supply and demand Price elasticity of demand