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Microeconomics

Microeconomics. Section 3. Elasticity 101 a measure of responsiveness Tells how a dependent variable (quantity) responds to a change in an independent variable (price) Will a change in price alter quantity a lot or a little? . Demand elasticity.

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Microeconomics

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  1. Microeconomics
  2. Section 3 Elasticity 101 a measure of responsiveness Tells how a dependent variable (quantity) responds to a change in an independent variable (price) Will a change in price alter quantity a lot or a little?
  3. Demand elasticity The extent to which a change in price causes a change in the quantity demanded. Tells economists and businesses just how sensitive consumers are to prices.
  4. Elastic 102 When a given change in price causes a relatively larger change in quantity demanded. Garden vegetables Very available in the summer, low prices People buy more Very scarce in the winter, high prices People buy less
  5. Inelastic demand 102 means that a given change in price causes relatively little change in quantity demanded. Table salt Gasoline Change in price does not cause an immediate or noticeable change in quantity demanded
  6. Unit elastic 103 demand for a product or service falls midway between elastic and inelastic A given change in prices causes a proportional change in quantity demanded 5% increase/decrease in price Causes 4-6% increase/decrease in quantity demanded.
  7. Chapter 5 Supply Section 1 Supply 113 the amount of a product that would be offered for sale at all possible market prices
  8. Law of Supply 113 the principle that suppliers will normally offer more for sale at high prices Less for sale at low prices
  9. Supply schedule 114 listing of the various quantities of a particular product supplied at all possible market prices
  10. Supply Curve 114 graph presentation of the supply schedule Line graph Slopes from upper right to lower left
  11. Market supply curve 115 graph showing more than one producer’s reactions to changes in supply Produce the same, similar product
  12. Quantity supplied 115 the amount that producers bring to market at a given price Change in quantity supplied 115 the change in amount brought to market in response to a change in price
  13. Change in Supply 116 A situation where suppliers offer different amounts of products for sale at all possible prices in the market. More offered at high prices Less offered at low prices
  14. Subsidy 117 a government payment to an individual business to Encourage it Protect it Some might call it a “stimulus” Helps businesses/economic activities that are Just starting Having difficulties
  15. Supply elasticity 118 measure of the way in which quantity supplied responds to a change in price Small increase in price leads to larger increase of output If the quantity supplied changes very little, supply is inelastic
  16. Hwk Assessments, Class Work, to Know
  17. Assessments: Checking for Understanding 1 Yachts over Cadillac Escalades Why? Escalades have more utility $20 million dollar home over Crystal champagne Why? Not buying Crystal won’t get one closer to affording the big home.
  18. The Income Gap Affording needs vs affording luxuries….. Cars Maybach Ralph Lauren car collection Hotel suites Slide show Burj al Arab (UAE) Mardan Palace Hotel (Turkey) Yachts Private Jets Private Islands Mansions Luxury items Watches
  19. The Income Gap US population: 300,000,000+/- 1% own 40% of US wealth. How many Americans is that? 3,000,000 9% own 40% of US wealth. How many Americans is that? 27,000,000 90% own 20% of US wealth. How many Americans is that? 270,000,000
  20. Assessments 3 Can the purchase be delayed? Are adequate substitutes available? Does the purchase use a large portion of income?
  21. Assessments 4. Lack of adequate substitutes for insulin
  22. Assessments 5 Because consumers can switch among the various substitutes.
  23. 1 Demand is the Desire Ability Willingness To buy Deals with How prices affect consumer spending Supply is The amount of a product available for sale Deals with How prices affect quantity supplied by producers Assessments: Checking for Understanding
  24. Assessments 3 Schedule: information on supply in table (list) form Curve: information on supply in graphic form
  25. Assessments 4 Determine amount produced by individual firms Add numbers and plot on a graph
  26. Assessments 5 Costs of inputs Productivity Technology Number of sellers Taxes and subsidies Expectations Government regulations.
  27. Images, p. 103 Question The concept of elasticity helps businesses analyze the sensitivity of consumers to price changes. Be sure to acquaint yourself with the graphs for the exam.
  28. Images, p. 106 Question If the luxury product uses a large portion of income, demand would generally be elastic
  29. Image, p. 114 Question Law of supply Quantity varies directly with price Law of demand Demand varies with the price
  30. Image, p. 115 Question Because the Law of Supply states that more will be offered for sale at high prices than low prices
  31. Images, p. 119 Question How fast a business can adjust to new prices.
  32. Images, p. 120 Question The number of substitutes and ability to delay the purchase are important for Demand elasticity Not supply elasticity
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