- •Харків. Вид. Хнеу, 2010
- •Харків. Вид. Хнеу, 2010
- •Introduction
- •Module 1. Basics of market economy Lecture 1. Basic economic terminology
- •1. Terminology
- •Economic resources
- •2. Economic reasoning
- •Choices made at the margin(край)
- •Three basic economic decisions
- •5. Economic forces
- •6. The role of theory in economics
- •Value judgments
- •Microeconomics and macroeconomics
- •8. Economics and other subjects
- •Lecture 2. Economic systems: capitalism, socialism and mixed economy
- •1. Evolving развитие Economic Systems
- •2. Socialism
- •3. Capitalism
- •Figure 2.1. The circular of income and expenditure in a market economy:
- •Specialization and Exchange обмен
- •4. Differences between soviet-style socialism and capitalism
- •Table 2.1 Capitalism’s and soviet-style socialism’s solutions to the three economic problems
- •5. Mixed Economy
- •Government and the Economy
- •Some modern models of mixed economy
- •6. Transition economy
- •Government price setting.
- •Passive macroeconomic policies.
- •7. Other classifications of economic systems
- •Lecture 3. Supply спрос and demand требование
- •1. Markets: purposes and functions
- •2. Demand
- •The Market Demand Curve and the Law of Demand
- •Table 3.1 a demand schedule for grade a eggs
- •Foundation for the law of demand:
- •Figure 3.2. Changes in demand
- •Figure 3.3. Changes in quantity demanded
- •3. Supply
- •The market supply curve and the law of supply
- •Table 3.2 a supply schedule for a eggs
- •4. The marriage of supply and demand (market equilibrium)
- •Lecture 4. Elasticity of supply and demand
- •1. Price elasticity of demand.
- •2. Price elasticity of supply.
- •1. Price elasticity of demand
- •Determinants of price elasticity of demand
- •3. The proportion of income consumers spend on the good.
- •2. Price elasticity of supply
- •Determinants of price elasticity of supply
- •Perfectly inelastic and perfectly elastic supply
- •Module 2. Basics of micro and macroeconomics Lecture 5. Business firm
- •3. Functions of business firms.
- •1. Terminology
- •Scale of production
- •2. Basic types of business enterprise
- •Pros and cons of corporate business
- •Other types of enterprises
- •3. Functions of business firms
- •4. Management
- •Lecture 6. Production, cost and profit
- •3. Variable costs, fixed costs, and total costs.
- •1. Production relationships
- •Period of Production
- •2. The law of diminishing marginal returns
- •Total product curve and marginal product curve
- •Average Product
- •3. Variable costs, fixed costs, and total costs
- •4. Measuring cost and profit
- •5. Normal profit and economic profit
- •Theories of profit
- •Profit as a pay for input
- •Table 7.1 Annual production possibilities for food and clothing
- •3. Law of increasing opportunity cost
- •4. Economic growth: expanding production possibilities
- •Lecture 8: Macroeconomics: economic growth, business cycles, unemployment, and inflation
- •2. Business cycles.
- •4. Inflation.
- •1. Economic growth and living standards
- •Productivity
- •2. Business cycles
- •Leading Indicators
- •3. Unemployment
- •Types of unemployment
- •4. Inflation
- •Types of inflation
- •Relationship between inflation and unemployment
- •Economic interdependence among nations
- •5. Macroeconomic policy
- •Types of macroeconomic policy
- •Lecture 9. Monopoly, oligopoly and competition
- •1. Monopoly
- •How monopoly is maintained: barriers to entry
- •2. Perfect competition
- •3. Monopolistic competition
- •Product differentiation
- •Price discrimination
- •4. Oligopoly
- •Concentration ratios
- •The competitive spectrum
- •1) Cartel.
- •Forming a cartel: directions and difficulties
- •2) Implicit Price Collusion.
- •3) Price war.
- •4) The Contestable Market Model.
- •5) Price leadership.
- •6) Price rigidity: the kinked demand curve model.
- •7) Entry-limit pricing.
- •A Comparison of Various Market Structures
- •Lecture 10. Money, banking and financial sector
- •2. The definition and functions of money.
- •1. Financial sector
- •Institutions and financial markets
- •Financial institutions
- •Types of financial Institutions
- •Financial Markets
- •Differences among Money Market Assets
- •The role of interest rates in the financial sector
- •References
- •Contents
Lecture 4. Elasticity of supply and demand
1. Price elasticity of demand.
2. Price elasticity of supply.
1. Price elasticity of demand
To forecast спрогнозировать the effect of price changes on their revenues доходы, businesses need a measure степень of buyer sensitivity чувствительность to changes in price called the elasticity of demand. Knowledge of demand sensitivity to income and the prices of related связанный goods help businesses market their products and manage resource use.
Price elasticity of demand is a number representing the percentage change in quantity demanded resulting from each 1 percent change in the price of a good. This number is used to gauge оценить the sensitivity of quantity demanded of a good to percentage changes, in the price of that good. Price elasticity of demand is a measure of the responsiveness о зывчивость of quantity demanded to price changes along a given demand curve.
Price elasticity is calculated by dividing the percentage change in quantity demanded of a good by the percentage change in price that caused it, other things being equal:
ED = % ΔQD ∕ % ΔP ,
ED – price elasticity of demand;
% ΔQD – percentage change in quantity demanded;
% ΔP – percentage change in price.
Notice that price elasticity of demand is a number without units of measurement because it's obtained by dividing two percentage changes. Also note that price elasticity of demand is a negative number. This is because an increase in price will generally result in a decrease in quantity demanded, other things being equal.
Categorizing price elasticity of demand as elastic or inelastic негибкий
In categorizing demand as more or less elastic, it's convenient подходит to ignore the minus sign in front of the number measuring the elasticity of demand. The larger the number after the minus sign, the more elastic the demand. In other words, the absolute value of the price elasticity of demand, the more elastic the demand.
1. A good has an inelastic demand if its price elasticity of demand is equal to or greater than 0 but less than 1, ignoring the minus sign. The smaller number after minus sign, the more inelastic the demand for the good.
Ignoring the direction of change, the percentage change in quantity demanded will be less than the percentage change in price that caused it when demand is inelastic. If the price elasticity of demand for a good were 0, it would implyподразумевает that consumers wouldn't respond реагировать at all to price changes and demand would be considered perfectly inelastic.
2. A good has a unit elastic demand if its price elasticity of demand is exactly 1 when the minus sign is ignored.
If demand for a good is unit elastic, the percentage change in its quantity demanded caused by a price change will equal the percentage change in price, again ignoring the direction of change.
3. An elastic demand prevails if a good's price elasticity of demand turns out to exceed 1, ignoring the minus sign.
If demand is elastic, the percentage change in quantity demanded caused by a price increase will exceed превышать the percentage change in the price (ignoring the direction of change).
Table 4.1 summarizes the relationship between percentage changes in price and quantityвеличина demanded for various cases.
Table 4.1
Price elasticity of demand as a gauge шаблон of demand responsiveness отзывчивость
|
Demand response реакция |
% ΔQD relative to % ΔP (ignoring direction of change) |
Value of ED (ignoring minus sign) |
|
Inelastic |
% ΔQD is less than % ΔP |
Equal to or greater than 0 but less than 1 |
|
Unit elastic |
% ΔQD equals % ΔP |
1 |
|
Elastic |
% ΔQD is greater than % ΔP |
Greater than 1 |