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    Lesson 6

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    maria genio
    The document discusses different types of elasticity including price elasticity, income elasticity, and cross elasticity. It defines elasticity as a measure of the responsiveness of quantity to changes in its determinants like price. The document provides examples and formulas for calculating the price elasticity of demand and supply, and explains what it means for something to be elastic, inelastic, or unitary based on the elasticity coefficient.

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    Lesson 6

    Uploaded by

    maria genio
    66 views21 pages
    The document discusses different types of elasticity including price elasticity, income elasticity, and cross elasticity. It defines elasticity as a measure of the responsiveness of quantity to changes in its determinants like price. The document provides examples and formulas for calculating the price elasticity of demand and supply, and explains what it means for something to be elastic, inelastic, or unitary based on the elasticity coefficient.

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    applied economics lesson 6

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    The document discusses different types of elasticity including price elasticity, income elasticity, and cross elasticity. It defines elasticity as a measure of the responsiveness of quantity to changes in its determinants like price. The document provides examples and formulas for calculating the price elasticity of demand and supply, and explains what it means for something to be elastic, inelastic, or unitary based on the elasticity coefficient.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    66 views21 pages

    Lesson 6

    Uploaded by

    maria genio
    The document discusses different types of elasticity including price elasticity, income elasticity, and cross elasticity. It defines elasticity as a measure of the responsiveness of quantity to changes in its determinants like price. The document provides examples and formulas for calculating the price elasticity of demand and supply, and explains what it means for something to be elastic, inelastic, or unitary based on the elasticity coefficient.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 21

    Elasticity of

    Supply and
    Demand
    Ojectives:

    At the end of the session the students are


    expected :

    • Define Elasticity
    • Identify the different kinds of elasticity
    • Explain and cite examples of the different
    types of elasticity.
    OTHER CONCEPTS OF
    ELASTICITY

    Elasticity- It is a measure used in response


    to changes in the determinants of demand
    and supply.

    Price Elasticity- a measure used in


    determining the percentage change in
    quantity against the percentage change in
    price
    OTHER CONCEPTS OF
    ELASTICITY

    Income Elasticity- the percentage change in


    quantity compared to the percentage change
    in income.

    Cross Elasticity- the percentage change in


    quantity of one good compared to the
    percentage change in the price of related
    goods.
    Price Elasticity of Demand

    Price Elasticity of Demand- refers to the


    degree of reaction or response of the
    buyers to changes in price of goods and
    services.
    Example:
    The price of rice of P16.00 per kilo at
    retail, leads a daily total sales among all
    markets in a given region of 100,000 kilos.
    The price then rises to P16.50 per kl. Which
    leads to sales of P97,000 kilos, or a
    reduction in the amount of P3,000. What is
    the response of quantity sold to the change
    in the price of rice?
    Example:
    Demand Schedule of Commodity X

    Price Quantity Demanded


    4 100
    5 60
    Interpretation of Elasticity

    <1---Inelastic
    =1---Unitary
    >1---Elastic
    To derive the price elasticity of
    demand, we use the formula:

    ep= Percentage change in quantity demanded


    Percentage change in price
    Where: percentage change in quantity demanded=
    Q2-Q1
    Q1
    percentage change in price= P2-P1
    P1
    Types of Elasticity

    Elastic- when a percentage change in price


    leads to a proportionately greater percentage
    change in quantity demanded. This means
    that a 1% change in price calls for more than
    1% change in quantity demanded.
    - The elasticity coefficient is more than 1.
    Types of Elasticity

    Inelastic- demand is described as inelastic


    when a percentage change in price results in
    a proportionately lesser change in price
    evokes less than 1% change in quantity
    demanded.
    - The coefficient of elasticity is less than 1.
    Unitary

    Unitary- when a percentage change in price


    leads to a proportionately equal percentage
    in quantity demanded.
    - The coefficient of elasticity is equal to 1.

    Perfectly Elastic- at a given price,


    percentage change in quantity demanded
    can change infinitely.
    Unitary

    Perfectly Inelastic- a percentage change in


    price creates no change in quantity
    demanded. There is no change in the
    quantity demand.
    - The coefficient is 0.
    Activity:
    1. Demand Schedule for Rice

    Price Quantity Demanded


    150 15,000
    154.50 14,550
    Activity:
    2. Demand Schedule for Burger

    Price Quantity Demanded


    35 500
    37 450
    Activity:
    3. Demand Schedule for Suman

    Price Quantity Demanded


    7 100
    9 80
    Interpret your answer whether it is Elastic,
    Inelastic and Unitary.
    Price Elasticity of Supply

    es= Percentage change in quantity supplied


    Percentage change in price
    Income Elasticity

    ey= Percentage change in quantity


    Percentage change in income
    Example:
    Demand Schedule of Commodity X

    Price Quantity Demanded


    P12.00 38
    P21.00 56
    Cross Elasticity

    ec= Percentage change in QD of Good A


    Percentage change in price of Good B

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