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LU3: Elasticity and Its Aplications - Coggle Diagram
LU3: Elasticity and Its Aplications
Ealsticity
a. allows us to analyze supply and demand with greater precision.
b. is a measure of how much buyers and sellers respond to changes in market conditions
Price elasticity of demand
a. a measure of how much the quantity demanded of a good responds to a change in the price of that good.
b. the percentage change in quantity demanded given a percent change in the price.
The Price Elasticity of Demand and Its Determinants
b. Necessities versus Luxuries
c. Definition of the Market
a. Availability of Close Substitutes
d. Time Horizon
Demand tends to be more elastic
b. if the good is a luxury.
c. the more narrowly defined the market.
a. the larger the number of close substitutes.
d. the longer the time period.
Computing the Price Elasticity of Demand
Price elasticity of demand= Percentage change in quantity demanded divide by= percentage change in price
The Variety of Demand Curves
a. Inelastic Demand
b. Elastic Demand
a. Perfectly Inelastic
b. Perfectly Elastic
c. Unit Elastic
Total Revenue and the Price Elasticity of Demand
a. the amount paid by buyers and received by sellers of a good.
Computing Income Elasticity
Income elasticty of demand= Percentage change in quantity demanded divide by percentage change in income
The Elasticity of Supply
a. measure of how much the quantity supplied of a good responds to a change in the price of that good.
Computing the Price Elasticity of Supply
Price elasticity of supply= Percentage change in quantity supplied divide by percentage change in price
Determinants of Elasticity of Supply
a. Ability of sellers to change the amount of the good they produce.
b. Time period.
The Application of Demand, Supply and Elasticty
b. Determine the direction of the shift of the curve.
c. Use the supply-and-demand diagram to see how the market equilibrium changes.
a. Examine whether the supply or demand curve shifts.