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Economics Presentation

Economics Presentation. The Elasticity of Demand. ABC Detergent. A DEMAND SCHEDULE FOR ABC DETERGENT. PRICE/UNIT ($). QUANTITY. 10. 1000. 20. 700. 500. 30. 250. 40. The Method to find out the elasticity of demand for ABC detergent if the price increases from $20 to $30:.

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Economics Presentation

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  1. Economics Presentation

  2. The Elasticity of Demand ABC Detergent

  3. A DEMAND SCHEDULE FOR ABC DETERGENT PRICE/UNIT ($) QUANTITY 10 1000 20 700 500 30 250 40

  4. The Method to find out the elasticity of demand for ABC detergent if the price increases from $20 to $30: 1/. The original price method (500-700) / (30-20) X 20/700 Ed = -|0.57| (Corr. 2 s.f) 2/. The average price and quantity method (500-700) (30+20) / 2 ------------ X ----------------- (30-20) (500+700) /2 Ed = -|0.83|(Corr. 2 s.f)

  5. Since Ed< 1, therefore the elasticity of demand for ABC detergent is INELASTIC. DIFFERENT TYPES OF PRICE ELASTICITY: Elastic : Ed > 1 Inelastic : Ed < 1 Unitarily elastic : Ed = 1 Perfectly inelastic : Ed = 0 Perfectly elastic: Ed = infinitive

  6. How to increase total revenue for ABC Detergent?? Price $ • Inelastic demand • If price increase, • =>% Increase in price > % decrease in Qd • Gain > Loss • Total Revenue increase P2 P1 GAIN LOSS Qd/period

  7. THE END

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