power point marvin
TRANSCRIPT
-
8/11/2019 Power Point Marvin
1/29
Presentation On
ELASTICITY
OF
DEMAND
-
8/11/2019 Power Point Marvin
2/29
(1) Definition Of Price Elasticity OfDemand
The change in the quantity demanded of aproduct due to a change in its price is knownas Price elasticity of demand.
-
8/11/2019 Power Point Marvin
3/29
Kinds Of Price Elasticity Of Demand
1) Perfectly elastic demand2) Relatively elastic demand3) Elasticity of demand equal to utility4) Relatively inelastic demand5) Perfectly inelastic demand
Let Us See Some Views On Them
-
8/11/2019 Power Point Marvin
4/29
Perfectly elastic demand
P
R
I
C
E
y
0 x
Perfectly elasticdemand curve
D D
-
8/11/2019 Power Point Marvin
5/29
Relatively elastic demand
Relatively elasticdemand curve
P
R
IC
E
demand0 x
y
D
D
-
8/11/2019 Power Point Marvin
6/29
Elasticity of demand equal to utility
Elasticity ofdemand equalto utility curve
y
x0 demand
P
R
I
C
E
D
D
-
8/11/2019 Power Point Marvin
7/29
Relatively inelastic demand
Relatively inelasticdemand curve
XO
Y
demand
D
D
P
R
I
C
E
-
8/11/2019 Power Point Marvin
8/29
Perfectly inelastic demand
demand
D
D
Perfectly inelasticdemand curve
0
Y
X
P
R
I
C
E
-
8/11/2019 Power Point Marvin
9/29
ALL KINDS OF DEMAND CAN BE SHOWNIN ONE DIAGRAM AS FOLLOW
DD1
D2D3
D4
D5
Y
X0
DEMAND
P
R
I
C
E
WHERED1) Perfectly elastic
demandD2)Relatively elastic
demandD3)Elasticity of demand
equal to utilityD4)Relatively inelasticdemand
D5)Perfectly inelasticdemand
-
8/11/2019 Power Point Marvin
10/29
Factors Affecting Price Elasticity OfDemand
-
8/11/2019 Power Point Marvin
11/29
Factors Affecting Price Elasticity OfDemand
Nature of the Commodity Availability of Substitutes
Variety of uses of commodity Postponement Influence of habits Proportion of Income spent on a commodity Range of prices
-
8/11/2019 Power Point Marvin
12/29
Practical Importance of the
Concept of Price Elasticity OfDemand
-
8/11/2019 Power Point Marvin
13/29
Practical Importance of the Concept ofPrice Elasticity Of Demand
The concept is helpful in taking BusinessDecisions
Importance of the concept in formatting TaxPolicy of the government
For determining the rewards of the Factors ofProduction
To determine the Terms of Trades Betweenthe Two Countries
-
8/11/2019 Power Point Marvin
14/29
(2) Income Elasticity Of Demand
-
8/11/2019 Power Point Marvin
15/29
-
8/11/2019 Power Point Marvin
16/29
Positive Income elasticity of demand Y
P
A
D
D
B SO XQuantity Demanded
I n c o m e
-
8/11/2019 Power Point Marvin
17/29
Positive Income elasticity of demand
Income Elasticity Equal to Unity or One Income Elasticity Greater Than Unity Or
One Income Elasticity Less Than Unity or One
-
8/11/2019 Power Point Marvin
18/29
Negative Income elasticity of demand
P r
i c e
P
B
A
S
Total Revenue
Quantity Demanded (000s)
-
8/11/2019 Power Point Marvin
19/29
Zero Income elasticity of demandY
XO D
D
Quantity Demanded
I n c o m e
-
8/11/2019 Power Point Marvin
20/29
-
8/11/2019 Power Point Marvin
21/29
Measurement Of Income Elasticity OfDemand
ThusIncome Elasticity of Demand
=
= (5/45) (500/5500)= 1.22therefore here the IED is 1.22 which is more
than one.
Q 2 Q 1
Q 2 + Q 1 P2 + P1
P2 P1
-
8/11/2019 Power Point Marvin
22/29
Cross Elasticity of Demand
Cross elasticity of demand express arelationship between the change in the
demand for a given product in response to achange in the price of some other product
-
8/11/2019 Power Point Marvin
23/29
Types of Cross Elasticity of Demand
Cross Elasticity of Demand Equal to Unity orOne
Cross Elasticity of Demand Greater than Unityor one Cross Elasticity of demand less than unity or
one
-
8/11/2019 Power Point Marvin
24/29
Measurement Cross Elasticity ofDemand
Proportionate change in Demandfor product X
Proportionate change in Price ofproduct Yi.e.
QX2 QX1
Cross Elasticity of Demand =
Cross Elasticity of Demand = QX2 + QX1PY2 PY1 PY2 + PY1
2 2
-
8/11/2019 Power Point Marvin
25/29
Cross Elasticity of Demand ForSubstitutes
P r i c e o f Y
Demand for YO
Y
X
D
D
-
8/11/2019 Power Point Marvin
26/29
Cross Elasticity of Demand ForComplementary Products
P r i c e o f Y
O
Y
XD
D
Demand for Y
-
8/11/2019 Power Point Marvin
27/29
Cross Elasticity of Demand For NeutralProducts
P r i c e o f Y
O
Y
X
D
Demand for Y
-
8/11/2019 Power Point Marvin
28/29
Importance of Cross Elasticity OfDemand
The concept is of very great importance inchanging the price of the products havingsubstitutes and complementary goods .
In demand forecasting Helps in measuring interdependence of price
of commodity . Multiproduct firms use these concept to
measure the effect of change in price of oneroduct on the demand of their other roduct
-
8/11/2019 Power Point Marvin
29/29
THE END