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Application of DD and SS analysis to real-world markets - Coggle Diagram
Application of DD and SS analysis to real-world markets
Consumer Expenditure / Producer Revenue, Consumer surplus and producer surplus
CE/PR = Price * Quantity
Consumer surplus and producer surplus
the difference between what the consumer is willing to pay for a unit of a good and what he actually pays for that unit of good
the difference between the revenue the producers receive form the sale of a unit of good and the price at which the producers are willing to supply
PED
%change in quantity demanded / %change in price
PED = 0
Perfectly price inelastic
PED = infinity
Perfectly price elastic
Factors affecting PED
Availability of close substitute goods
Proportion of income spent
Degree of necessity
Addction
Time
PES
%change in quantity supplied of good / %change in price of good
PES = 0
Perfectly price inelastic
PES = infinity
Perfectly price elastic
Factors affecting PES
Time
Short run
Long run
Existence of spare capacity
Availability of stocks
Ease of factor substitutability
Ease of factor mobility
Problems in the use of elasticity concepts
Ceteris paribus assumption does not hold
Difficulties in computing elasticity values
Other Objectives of firms