# The Demand Side of the Market

Download The Demand Side of the Market

## Preview text

Econ Dept, UMR Presents

The Demand Side of the Market

Starring

u Utility Theory u Consumer Surplus u Elasticity

Featuring

uThe MU/P Rule uThe Meaning of Value uFour Elasticities:

vPrice Elasticity of Demand vIncome Elasticity vCross Price Elasticity vPrice Elasticity of Supply

uThe Elasticity-TR Relationship

In Three Parts

Consumer Choice Theory

Consumer Surplus

Elasticity

A. Price Elasticity of Demand B. Other Important Elasticities

Part 3

Elasticity Measures of Response

This Slide Show Discusses Income Elasticity; Cross Price Elasticity of Demand; And Price Elasticity of Supply

u Price elasticity of demand is discussed in slide show III.A.

Review: A Generic Definition of Elasticity

u Y = f(x)

u Elasticity, ,, = %∆y/%∆x, where ∆ is read

“change in” u %∆Y = (∆y/y)*100; %∆X = (∆x/x)*100 u (∆Y/y)/(∆x/x), or u [(∆Y/∆x)/(x/y)] u In words, elasticity gives us the estimated

percentage change in one variable, y, in response to a percentage change in another variable, x, c.p.

Review: Generic Interpretation

of Elasticity

u , = %∆Y/%∆x = 2

v This means if x were to change by 1 percent we would expect y to change by 2 percent in the same direction, c.P

u , = %∆Y/%∆x = - 2

v This means if x were to change by 1 percent we would expect y to change by 2 percent in the opposite direction, c.p.

Other Important Elasticities

INCOME = ,I =

ELASTICITY

% change DX % change in consumer income

CROSS-PRICE = ,X,Z =

ELASTICITY

% change DX

% change in the price of another good, Z

PRICE ELASTICITY OF SUPPLY

=

,S

= % change Qs

% change in price

Elasticity Formulas

u Income elasticity

,=

%∆ in D =

∆D

I

I %∆ in I

∆I D

u Cross price elasticity of demand

, = %∆ in D1 =

D1,P2 %∆ in P2

∆D1 P2 ∆ P2 D1

u Price elasticity of supply

, = %∆ in QS = ∆QS P

S

%∆ in P

∆P Q

The Demand Side of the Market

Starring

u Utility Theory u Consumer Surplus u Elasticity

Featuring

uThe MU/P Rule uThe Meaning of Value uFour Elasticities:

vPrice Elasticity of Demand vIncome Elasticity vCross Price Elasticity vPrice Elasticity of Supply

uThe Elasticity-TR Relationship

In Three Parts

Consumer Choice Theory

Consumer Surplus

Elasticity

A. Price Elasticity of Demand B. Other Important Elasticities

Part 3

Elasticity Measures of Response

This Slide Show Discusses Income Elasticity; Cross Price Elasticity of Demand; And Price Elasticity of Supply

u Price elasticity of demand is discussed in slide show III.A.

Review: A Generic Definition of Elasticity

u Y = f(x)

u Elasticity, ,, = %∆y/%∆x, where ∆ is read

“change in” u %∆Y = (∆y/y)*100; %∆X = (∆x/x)*100 u (∆Y/y)/(∆x/x), or u [(∆Y/∆x)/(x/y)] u In words, elasticity gives us the estimated

percentage change in one variable, y, in response to a percentage change in another variable, x, c.p.

Review: Generic Interpretation

of Elasticity

u , = %∆Y/%∆x = 2

v This means if x were to change by 1 percent we would expect y to change by 2 percent in the same direction, c.P

u , = %∆Y/%∆x = - 2

v This means if x were to change by 1 percent we would expect y to change by 2 percent in the opposite direction, c.p.

Other Important Elasticities

INCOME = ,I =

ELASTICITY

% change DX % change in consumer income

CROSS-PRICE = ,X,Z =

ELASTICITY

% change DX

% change in the price of another good, Z

PRICE ELASTICITY OF SUPPLY

=

,S

= % change Qs

% change in price

Elasticity Formulas

u Income elasticity

,=

%∆ in D =

∆D

I

I %∆ in I

∆I D

u Cross price elasticity of demand

, = %∆ in D1 =

D1,P2 %∆ in P2

∆D1 P2 ∆ P2 D1

u Price elasticity of supply

, = %∆ in QS = ∆QS P

S

%∆ in P

∆P Q

## Categories

## You my also like

### Chapter 5: Elasticity and Its Application Principles of

138.8 KB59.2K20.1K### Elasticity and Its Application

423.6 KB20K3.6K### Elasticity in General Price Elasticity of Demand

15.5 KB18.6K6.7K### Chapter 6 Elasticity

1.1 MB8.4K2.4K### Elasticity and its Application Premium PowerPoint Slides by

92.7 KB48.6K14.6K### Point Elasticity Versus Arc Elasticity: On Different

344 KB34K11.6K### Elasticities of Demand and Supply

985.3 KB35.3K4.9K### Price Elasticity Of Alcohol Demand In India

643.6 KB15.1K5.3K### Principles of Economics Dirk Mateer University of Kentucky

904.5 KB7.6K3.2K