SlideShare a Scribd company logo
1 of 19
Download to read offline
ELASTICITY cont’d.
Total expenditure and Price Elasticity
of Demand
There is an important relationship
between Price Elasticity of Demand and
Total Expenditure (Revenue).
def: Total expenditure (TR) = Price X
Quantity
Total expenditure and Price Elasticity
of Demand
• if demand is elastic, expenditure
increases as price falls ,
• if demand is inelastic,
expenditure increases as price
rises .
Table #1
Sample Demand Schedule
pt.

QD

TR

A

6

1

$6

B

5

2

$10

C

4

3

$12

D

3

4

$12

E

2

5

$10

F
 

P

6

1

$6

 

 

 
A-B = -11/3
B-C = -9/5
C-D = -1
D-E = -5/9
E-F = -3/11
Elasticity2
Notice the relationship between price elasticity
of demand and total expenditure:
• From B-C, the price elasticity of demand was
-9/5 (therefore, demand is elastic since the
absolute value of -9/5 is greater than 1). Also,
from B-C, total expenditure increased as price
fell.
• Now refer back to the table above and
see the following relationships:
• When demand is elastic, total expenditure rises
as price falls (see A-B or B-C)
• When demand is unit elastic, total expenditure
is at its maximum, and does not change when
price changes (see C-D)
• When demand is inelastic, total expenditure
rises as price rises (see E-D or F-E)
Price (dollars per TV)

Demand and Total Expenditure
Expenditure loss

400

elasticity = 0.6

300

200
Expenditure gain

100

Db
40

60

80
120
Quantity (millions of TVs per year)
Elasticity and Expenditure
• Elastic demand —
1 % price decrease
results in

more than a 1 % increase in quantity.
• Total expenditure will increase
Elasticity and Expenditure
• Inelastic demand —
1 % price decrease
results in

less than a 1 % increase in quantity.
• Total expenditure will decrease
Elasticity and Expenditure
• Unit elastic demand —
1 % price decrease
results in
a 1 % increase in quantity.
• Total expenditure does not change
Income Elasticity of Demand
Income Elasticity of Demand
• Normal Goods - A good is a normal good
if its income elasticity is positive. This
means that when income rises, quantity
demanded rises - most goods are normal
goods. Also, as shown below, there are
different types of normal goods:
Income Elasticity of Demand
• Necessity Goods - A good is a necessity if its
income elasticity is positive, but less than 1.
This means that if income rises by 10%,
quantity demanded rises by less than 10% therefore, as people's income rises, they spend
a smaller percentage of their income on
necessities.
• Luxury Goods - A good is a luxury good if its
income elasticity is positive, and greater than 1.
This means that if income rises by 10%, quantity
demanded rises by more than 10% - therefore,
people spend more of their income on luxuries
when they have larger incomes
Income Elasticity of Demand
• Inferior Goods - A good is an inferior
good if its income elasticity is negative.
This means that when income rises,
quantity demanded falls.
Cross Elasticity of Demand
Cross elasticity of demand= Percentage change in quantity demanded of
good X
Percentage change in price of good Y

Complements have negative cross elasticities.
Suplements have positive cross elasticities .
Price Elasticity of Supply
Determinants of Price
Elasticity of Supply
•

The ability of producers to change output - the
easier it is for producers to alter their output,
the more elastic will be the supply of a product.

•

Time Horizon - The price elasticity of supply
for most products is more elastic in the longrun than in the short-run. This is because a
longer time horizon gives producers more
opportunity to alter their output of a good.

More Related Content

What's hot

Ppt elasticity
Ppt elasticityPpt elasticity
Ppt elasticitypr1ka
 
Cross Price Elasticity of Demand
Cross Price Elasticity of DemandCross Price Elasticity of Demand
Cross Price Elasticity of Demandtutor2u
 
Coefficient of price elasticity of demand
Coefficient of price elasticity of demandCoefficient of price elasticity of demand
Coefficient of price elasticity of demandtutor2u
 
Demand, Supply 2009 1
Demand, Supply 2009  1Demand, Supply 2009  1
Demand, Supply 2009 1siraj2762268
 

What's hot (8)

Cms file 465393
Cms file 465393Cms file 465393
Cms file 465393
 
Ppt elasticity
Ppt elasticityPpt elasticity
Ppt elasticity
 
Elasticity
Elasticity Elasticity
Elasticity
 
Cross Price Elasticity of Demand
Cross Price Elasticity of DemandCross Price Elasticity of Demand
Cross Price Elasticity of Demand
 
Lecture 4 elsasticity
Lecture 4 elsasticityLecture 4 elsasticity
Lecture 4 elsasticity
 
Coefficient of price elasticity of demand
Coefficient of price elasticity of demandCoefficient of price elasticity of demand
Coefficient of price elasticity of demand
 
Demand, Supply 2009 1
Demand, Supply 2009  1Demand, Supply 2009  1
Demand, Supply 2009 1
 
Elastic vs-inelastic-demand
Elastic vs-inelastic-demandElastic vs-inelastic-demand
Elastic vs-inelastic-demand
 

Viewers also liked

Harmonics analysis of four switch three phase inverter
Harmonics analysis of four switch three phase inverterHarmonics analysis of four switch three phase inverter
Harmonics analysis of four switch three phase inverterZac Darcy
 
Optimal and pid controller for controlling camera’s position in unmanned aeri...
Optimal and pid controller for controlling camera’s position in unmanned aeri...Optimal and pid controller for controlling camera’s position in unmanned aeri...
Optimal and pid controller for controlling camera’s position in unmanned aeri...Zac Darcy
 
Qatar Outlook 2014 AAQ
Qatar Outlook 2014 AAQQatar Outlook 2014 AAQ
Qatar Outlook 2014 AAQAdel Abouhana
 
Holy Trinity_A-Z
Holy Trinity_A-ZHoly Trinity_A-Z
Holy Trinity_A-Zshillecce
 
Whats ahead for the economy ASA
Whats ahead for the economy ASAWhats ahead for the economy ASA
Whats ahead for the economy ASAAdel Abouhana
 
Jumptools testimonials
Jumptools testimonialsJumptools testimonials
Jumptools testimonialsJumptools Inc.
 
Seven keys to success
Seven keys to successSeven keys to success
Seven keys to successGus Ferguson
 
Informatīvais ziņojums “Par priekšlikumiem valsts budžeta ieņēmumiem un izdev...
Informatīvais ziņojums “Par priekšlikumiem valsts budžeta ieņēmumiem un izdev...Informatīvais ziņojums “Par priekšlikumiem valsts budžeta ieņēmumiem un izdev...
Informatīvais ziņojums “Par priekšlikumiem valsts budžeta ieņēmumiem un izdev...Finanšu ministrija
 
A New Signature Protocol Based on RSA and Elgamal Scheme
A New Signature Protocol Based on RSA and Elgamal SchemeA New Signature Protocol Based on RSA and Elgamal Scheme
A New Signature Protocol Based on RSA and Elgamal SchemeZac Darcy
 
Temperature Cycling Tests
Temperature Cycling TestsTemperature Cycling Tests
Temperature Cycling TestsAnjar Bumi
 
Antykwa toruńska condensed
Antykwa toruńska condensedAntykwa toruńska condensed
Antykwa toruńska condensedHirwanto Iwan
 

Viewers also liked (20)

Antykwa toruńska
Antykwa toruńskaAntykwa toruńska
Antykwa toruńska
 
Harmonics analysis of four switch three phase inverter
Harmonics analysis of four switch three phase inverterHarmonics analysis of four switch three phase inverter
Harmonics analysis of four switch three phase inverter
 
Optimal and pid controller for controlling camera’s position in unmanned aeri...
Optimal and pid controller for controlling camera’s position in unmanned aeri...Optimal and pid controller for controlling camera’s position in unmanned aeri...
Optimal and pid controller for controlling camera’s position in unmanned aeri...
 
Qatar Outlook 2014 AAQ
Qatar Outlook 2014 AAQQatar Outlook 2014 AAQ
Qatar Outlook 2014 AAQ
 
Lestin Beamer
Lestin BeamerLestin Beamer
Lestin Beamer
 
Holy Trinity_A-Z
Holy Trinity_A-ZHoly Trinity_A-Z
Holy Trinity_A-Z
 
Whats ahead for the economy ASA
Whats ahead for the economy ASAWhats ahead for the economy ASA
Whats ahead for the economy ASA
 
Jumptools testimonials
Jumptools testimonialsJumptools testimonials
Jumptools testimonials
 
Asertividad ok
Asertividad okAsertividad ok
Asertividad ok
 
Seven keys to success
Seven keys to successSeven keys to success
Seven keys to success
 
Informatīvais ziņojums “Par priekšlikumiem valsts budžeta ieņēmumiem un izdev...
Informatīvais ziņojums “Par priekšlikumiem valsts budžeta ieņēmumiem un izdev...Informatīvais ziņojums “Par priekšlikumiem valsts budžeta ieņēmumiem un izdev...
Informatīvais ziņojums “Par priekšlikumiem valsts budžeta ieņēmumiem un izdev...
 
GDP.s ASA
GDP.s ASAGDP.s ASA
GDP.s ASA
 
A New Signature Protocol Based on RSA and Elgamal Scheme
A New Signature Protocol Based on RSA and Elgamal SchemeA New Signature Protocol Based on RSA and Elgamal Scheme
A New Signature Protocol Based on RSA and Elgamal Scheme
 
Gfs artemisia
Gfs artemisiaGfs artemisia
Gfs artemisia
 
Computer concrete
Computer concreteComputer concrete
Computer concrete
 
Temperature Cycling Tests
Temperature Cycling TestsTemperature Cycling Tests
Temperature Cycling Tests
 
Lx font
Lx fontLx font
Lx font
 
Buoyancy in air2
Buoyancy in air2Buoyancy in air2
Buoyancy in air2
 
Antykwa toruńska condensed
Antykwa toruńska condensedAntykwa toruńska condensed
Antykwa toruńska condensed
 
Make your branded content fly
Make your branded content flyMake your branded content fly
Make your branded content fly
 

Similar to Elasticity2

Relationship bw quantity demanded and total revenue of the firm depending on...
Relationship bw quantity demanded and  total revenue of the firm depending on...Relationship bw quantity demanded and  total revenue of the firm depending on...
Relationship bw quantity demanded and total revenue of the firm depending on...ZoyaRajpoot9
 
Elasticity Of Supply Micro Economics ECO101
Elasticity Of Supply Micro Economics ECO101Elasticity Of Supply Micro Economics ECO101
Elasticity Of Supply Micro Economics ECO101Sabih Kamran
 
L-1, M.U, Lawof demand & demand elasticities.ppt
L-1, M.U, Lawof demand & demand elasticities.pptL-1, M.U, Lawof demand & demand elasticities.ppt
L-1, M.U, Lawof demand & demand elasticities.pptupma5
 
Price, cross and income elasticity
Price, cross and income elasticityPrice, cross and income elasticity
Price, cross and income elasticitymattbentley34
 
3. elasticity of demand and supply
3. elasticity of demand and supply3. elasticity of demand and supply
3. elasticity of demand and supplyShivam Taneja
 
Elasticity of demand
Elasticity of demandElasticity of demand
Elasticity of demandShubham Nigam
 
Elasticity Revision 2022.pptx
Elasticity Revision 2022.pptxElasticity Revision 2022.pptx
Elasticity Revision 2022.pptxJon Newland
 
Demand Analysis –Demand Forecasting and Law of Supply for Management and B...
Demand  Analysis –Demand Forecasting  and Law of Supply  for Management and B...Demand  Analysis –Demand Forecasting  and Law of Supply  for Management and B...
Demand Analysis –Demand Forecasting and Law of Supply for Management and B...DrSaiKumar2
 
Slideshare Demand Analysis –Demand Forecasting.ppt
Slideshare Demand  Analysis –Demand Forecasting.pptSlideshare Demand  Analysis –Demand Forecasting.ppt
Slideshare Demand Analysis –Demand Forecasting.pptDrSaiKumar2
 
The Concept Of Elasticity In Economics
The Concept Of Elasticity In EconomicsThe Concept Of Elasticity In Economics
The Concept Of Elasticity In EconomicsFarnazSha2
 
2Elasticity Analysis.pdf
2Elasticity Analysis.pdf2Elasticity Analysis.pdf
2Elasticity Analysis.pdfAntonWadea
 

Similar to Elasticity2 (20)

Relationship bw quantity demanded and total revenue of the firm depending on...
Relationship bw quantity demanded and  total revenue of the firm depending on...Relationship bw quantity demanded and  total revenue of the firm depending on...
Relationship bw quantity demanded and total revenue of the firm depending on...
 
Demand
DemandDemand
Demand
 
Elasticity Of Supply Micro Economics ECO101
Elasticity Of Supply Micro Economics ECO101Elasticity Of Supply Micro Economics ECO101
Elasticity Of Supply Micro Economics ECO101
 
L-1, M.U, Lawof demand & demand elasticities.ppt
L-1, M.U, Lawof demand & demand elasticities.pptL-1, M.U, Lawof demand & demand elasticities.ppt
L-1, M.U, Lawof demand & demand elasticities.ppt
 
Demand
DemandDemand
Demand
 
Elasticity
Elasticity Elasticity
Elasticity
 
Price, cross and income elasticity
Price, cross and income elasticityPrice, cross and income elasticity
Price, cross and income elasticity
 
3. elasticity of demand and supply
3. elasticity of demand and supply3. elasticity of demand and supply
3. elasticity of demand and supply
 
Elasticity of demand
Elasticity of demandElasticity of demand
Elasticity of demand
 
My elasticity
My elasticityMy elasticity
My elasticity
 
Business Econimics.ppt
Business Econimics.pptBusiness Econimics.ppt
Business Econimics.ppt
 
Slide-LSE-2-Ekonomi.ppt
Slide-LSE-2-Ekonomi.pptSlide-LSE-2-Ekonomi.ppt
Slide-LSE-2-Ekonomi.ppt
 
Elasticity Revision 2022.pptx
Elasticity Revision 2022.pptxElasticity Revision 2022.pptx
Elasticity Revision 2022.pptx
 
Demand and supply
Demand and supplyDemand and supply
Demand and supply
 
Lecture 5 elasticity
Lecture 5 elasticityLecture 5 elasticity
Lecture 5 elasticity
 
Elasticity of demand
Elasticity of demandElasticity of demand
Elasticity of demand
 
Demand Analysis –Demand Forecasting and Law of Supply for Management and B...
Demand  Analysis –Demand Forecasting  and Law of Supply  for Management and B...Demand  Analysis –Demand Forecasting  and Law of Supply  for Management and B...
Demand Analysis –Demand Forecasting and Law of Supply for Management and B...
 
Slideshare Demand Analysis –Demand Forecasting.ppt
Slideshare Demand  Analysis –Demand Forecasting.pptSlideshare Demand  Analysis –Demand Forecasting.ppt
Slideshare Demand Analysis –Demand Forecasting.ppt
 
The Concept Of Elasticity In Economics
The Concept Of Elasticity In EconomicsThe Concept Of Elasticity In Economics
The Concept Of Elasticity In Economics
 
2Elasticity Analysis.pdf
2Elasticity Analysis.pdf2Elasticity Analysis.pdf
2Elasticity Analysis.pdf
 

More from Bhupendra Bule

More from Bhupendra Bule (13)

Supply
SupplySupply
Supply
 
Price change income and substittution effects
Price change income and substittution effectsPrice change income and substittution effects
Price change income and substittution effects
 
Perfectcompetition
PerfectcompetitionPerfectcompetition
Perfectcompetition
 
Oligopoly
OligopolyOligopoly
Oligopoly
 
Monopoly1
Monopoly1Monopoly1
Monopoly1
 
Intro lecture
Intro lectureIntro lecture
Intro lecture
 
Indifference curve
Indifference curveIndifference curve
Indifference curve
 
Firms
FirmsFirms
Firms
 
Elasticity
ElasticityElasticity
Elasticity
 
D emand
D emandD emand
D emand
 
Consumer2 behaviour indifference curve
Consumer2 behaviour indifference curveConsumer2 behaviour indifference curve
Consumer2 behaviour indifference curve
 
Consumer 1 behaviour
Consumer 1 behaviourConsumer 1 behaviour
Consumer 1 behaviour
 
Supply and demand
Supply and demandSupply and demand
Supply and demand
 

Recently uploaded

A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.mcshagufta46
 
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdfAMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdfJohnCarloValencia4
 
Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access
 
מיסוי רילוקיישן לפורטוגל- היבטי מיסוי ישראלי ופורטוגלי
מיסוי רילוקיישן לפורטוגל- היבטי מיסוי ישראלי ופורטוגלימיסוי רילוקיישן לפורטוגל- היבטי מיסוי ישראלי ופורטוגלי
מיסוי רילוקיישן לפורטוגל- היבטי מיסוי ישראלי ופורטוגליBen Shushan & Co. C.P.A (Isr.)
 
Q2 2024 APCO Geopolitical Radar - The Global Operating Environment for Business
Q2 2024 APCO Geopolitical Radar - The Global Operating Environment for BusinessQ2 2024 APCO Geopolitical Radar - The Global Operating Environment for Business
Q2 2024 APCO Geopolitical Radar - The Global Operating Environment for BusinessAPCO
 
Six Sigma Improvement Process: Transforming Processes, Elevating Performance
Six Sigma Improvement Process: Transforming Processes, Elevating PerformanceSix Sigma Improvement Process: Transforming Processes, Elevating Performance
Six Sigma Improvement Process: Transforming Processes, Elevating PerformanceOperational Excellence Consulting
 
MC Heights construction company in Jhang
MC Heights construction company in JhangMC Heights construction company in Jhang
MC Heights construction company in Jhangmcgroupjeya
 
Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access
 
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...AustraliaChapterIIBA
 
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...Brian Solis
 
Entrepreneurship & organisations: influences and organizations
Entrepreneurship & organisations: influences and organizationsEntrepreneurship & organisations: influences and organizations
Entrepreneurship & organisations: influences and organizationsP&CO
 
Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access
 
Talent Management research intelligence_13 paradigm shifts_20 March 2024.pdf
Talent Management research intelligence_13 paradigm shifts_20 March 2024.pdfTalent Management research intelligence_13 paradigm shifts_20 March 2024.pdf
Talent Management research intelligence_13 paradigm shifts_20 March 2024.pdfCharles Cotter, PhD
 
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...IMARC Group
 
Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access
 
Building Your Personal Brand on LinkedIn - Expert Planet- 2024
 Building Your Personal Brand on LinkedIn - Expert Planet-  2024 Building Your Personal Brand on LinkedIn - Expert Planet-  2024
Building Your Personal Brand on LinkedIn - Expert Planet- 2024Stephan Koning
 
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John Meulemans
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John MeulemansBCE24 | Virtual Brand Ambassadors: Making Brands Personal - John Meulemans
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John MeulemansBBPMedia1
 
Intellectual Property Licensing Examples
Intellectual Property Licensing ExamplesIntellectual Property Licensing Examples
Intellectual Property Licensing Examplesamberjiles31
 

Recently uploaded (20)

A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.
 
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdfAMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
AMAZON SELLER VIRTUAL ASSISTANT PRODUCT RESEARCH .pdf
 
Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024
 
מיסוי רילוקיישן לפורטוגל- היבטי מיסוי ישראלי ופורטוגלי
מיסוי רילוקיישן לפורטוגל- היבטי מיסוי ישראלי ופורטוגלימיסוי רילוקיישן לפורטוגל- היבטי מיסוי ישראלי ופורטוגלי
מיסוי רילוקיישן לפורטוגל- היבטי מיסוי ישראלי ופורטוגלי
 
Q2 2024 APCO Geopolitical Radar - The Global Operating Environment for Business
Q2 2024 APCO Geopolitical Radar - The Global Operating Environment for BusinessQ2 2024 APCO Geopolitical Radar - The Global Operating Environment for Business
Q2 2024 APCO Geopolitical Radar - The Global Operating Environment for Business
 
Six Sigma Improvement Process: Transforming Processes, Elevating Performance
Six Sigma Improvement Process: Transforming Processes, Elevating PerformanceSix Sigma Improvement Process: Transforming Processes, Elevating Performance
Six Sigma Improvement Process: Transforming Processes, Elevating Performance
 
MC Heights construction company in Jhang
MC Heights construction company in JhangMC Heights construction company in Jhang
MC Heights construction company in Jhang
 
Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024
 
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
IIBA® Melbourne - Navigating Business Analysis - Excellence for Career Growth...
 
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
 
Entrepreneurship & organisations: influences and organizations
Entrepreneurship & organisations: influences and organizationsEntrepreneurship & organisations: influences and organizations
Entrepreneurship & organisations: influences and organizations
 
Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024
 
Talent Management research intelligence_13 paradigm shifts_20 March 2024.pdf
Talent Management research intelligence_13 paradigm shifts_20 March 2024.pdfTalent Management research intelligence_13 paradigm shifts_20 March 2024.pdf
Talent Management research intelligence_13 paradigm shifts_20 March 2024.pdf
 
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
 
Deira Dubai Call Girls +971552825767 Call Girls In Downtown Dubai
Deira Dubai Call Girls +971552825767 Call Girls In Downtown DubaiDeira Dubai Call Girls +971552825767 Call Girls In Downtown Dubai
Deira Dubai Call Girls +971552825767 Call Girls In Downtown Dubai
 
Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024
 
Building Your Personal Brand on LinkedIn - Expert Planet- 2024
 Building Your Personal Brand on LinkedIn - Expert Planet-  2024 Building Your Personal Brand on LinkedIn - Expert Planet-  2024
Building Your Personal Brand on LinkedIn - Expert Planet- 2024
 
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John Meulemans
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John MeulemansBCE24 | Virtual Brand Ambassadors: Making Brands Personal - John Meulemans
BCE24 | Virtual Brand Ambassadors: Making Brands Personal - John Meulemans
 
WAM Corporate Presentation Mar 25 2024.pdf
WAM Corporate Presentation Mar 25 2024.pdfWAM Corporate Presentation Mar 25 2024.pdf
WAM Corporate Presentation Mar 25 2024.pdf
 
Intellectual Property Licensing Examples
Intellectual Property Licensing ExamplesIntellectual Property Licensing Examples
Intellectual Property Licensing Examples
 

Elasticity2

  • 2. Total expenditure and Price Elasticity of Demand There is an important relationship between Price Elasticity of Demand and Total Expenditure (Revenue). def: Total expenditure (TR) = Price X Quantity
  • 3. Total expenditure and Price Elasticity of Demand • if demand is elastic, expenditure increases as price falls , • if demand is inelastic, expenditure increases as price rises .
  • 4. Table #1 Sample Demand Schedule pt. QD TR A 6 1 $6 B 5 2 $10 C 4 3 $12 D 3 4 $12 E 2 5 $10 F   P 6 1 $6      
  • 5. A-B = -11/3 B-C = -9/5 C-D = -1 D-E = -5/9 E-F = -3/11
  • 7. Notice the relationship between price elasticity of demand and total expenditure: • From B-C, the price elasticity of demand was -9/5 (therefore, demand is elastic since the absolute value of -9/5 is greater than 1). Also, from B-C, total expenditure increased as price fell.
  • 8. • Now refer back to the table above and see the following relationships: • When demand is elastic, total expenditure rises as price falls (see A-B or B-C) • When demand is unit elastic, total expenditure is at its maximum, and does not change when price changes (see C-D) • When demand is inelastic, total expenditure rises as price rises (see E-D or F-E)
  • 9. Price (dollars per TV) Demand and Total Expenditure Expenditure loss 400 elasticity = 0.6 300 200 Expenditure gain 100 Db 40 60 80 120 Quantity (millions of TVs per year)
  • 10. Elasticity and Expenditure • Elastic demand — 1 % price decrease results in more than a 1 % increase in quantity. • Total expenditure will increase
  • 11. Elasticity and Expenditure • Inelastic demand — 1 % price decrease results in less than a 1 % increase in quantity. • Total expenditure will decrease
  • 12. Elasticity and Expenditure • Unit elastic demand — 1 % price decrease results in a 1 % increase in quantity. • Total expenditure does not change
  • 14. Income Elasticity of Demand • Normal Goods - A good is a normal good if its income elasticity is positive. This means that when income rises, quantity demanded rises - most goods are normal goods. Also, as shown below, there are different types of normal goods:
  • 15. Income Elasticity of Demand • Necessity Goods - A good is a necessity if its income elasticity is positive, but less than 1. This means that if income rises by 10%, quantity demanded rises by less than 10% therefore, as people's income rises, they spend a smaller percentage of their income on necessities. • Luxury Goods - A good is a luxury good if its income elasticity is positive, and greater than 1. This means that if income rises by 10%, quantity demanded rises by more than 10% - therefore, people spend more of their income on luxuries when they have larger incomes
  • 16. Income Elasticity of Demand • Inferior Goods - A good is an inferior good if its income elasticity is negative. This means that when income rises, quantity demanded falls.
  • 17. Cross Elasticity of Demand Cross elasticity of demand= Percentage change in quantity demanded of good X Percentage change in price of good Y Complements have negative cross elasticities. Suplements have positive cross elasticities .
  • 19. Determinants of Price Elasticity of Supply • The ability of producers to change output - the easier it is for producers to alter their output, the more elastic will be the supply of a product. • Time Horizon - The price elasticity of supply for most products is more elastic in the longrun than in the short-run. This is because a longer time horizon gives producers more opportunity to alter their output of a good.