elasticity
DESCRIPTION
ELASTICITYTRANSCRIPT
ELASTICITYELASTISITEIT
MOHR & F
OURIE: C
HAPTER /
HOOFSTU
K 9
ECON121_2013
OUTCOMES
Types
Categories
Define
Calculate Point Arc
Interpret
Factors
Impact on actions Consumer Producer
UITKOMSTES
Tipes
Kategorieë
Definieer
Bereken Punt Boog
Interpreteer
Faktore
Impak op aksies van Verbruiker Produsent
VRAAG
• Wat is elastisiteit?
QUESTION
• What is elasticity?
PLAY TIME
Stretch a rubber band
What are we looking at?
SPEELTYD
Rek ‘n rekkie
Waarna kyk ons?
PLAY TIME
Equilibrium (Ch 7 – 8)
∆ S & D (PPPINT)
SPEELTYD
Ewewig (Hfstk 7 – 8)
∆ V & A (PPPINT)
PLAY TIME
• What is the absolute or relative size of the change in price and quantity
• Eq P ↕ by how much?
• Eq Q ↕ by how much?
• TR?
• Higher prices or lower prices?
WHAT IS ELASTICITY?
How sensitive or responsive the dependent variable is to changes in the independent variable.
WAT IS ELASTISITEIT?
Hoe sensitief of gevoelig die afhanklike veranderlike vir veranderings in die onafhanklike verandering is.
P
%
%...
%
%
WHAT IS ELASTICITY? WAT IS ELASTISITEIT?
WHAT IS ELASTICITY?
Elasticity measures how much impact a small (1%) change in price (or other factors) will have on the quantity (supplied or demanded).
WAT IS ELASTISITEIT?
Elastisiteit meet hoeveel impak ‘n klein verandering (1%) in prys (of ander faktore) op die hoeveelheid (gevra of aangebied) sal hê.
P
%
%...
%
%
4 TYPES
Price elasticity of demand
Income elasticity of demand
Cross-price elasticity of demand
Price elasticity of supply
4 SOORTE
Prys-elastisiteit van vraag
Inkome-elastisiteit van vraag
Kruis-prys-elastisiteit van vraag
Prys-elastisiteit van aanbod
Ap
Vxp
VY
Vp
E
E
E
E
Sp
Dxp
DY
Dp
E
E
E
E
__?__ elasticity of __?__ _?_ elastisiteit van _?_
WHAT IS PRICE ELASTICITY OF DEMAND?
PED is the % ▲ in the Qd if the price of the product ▲ by 1 %
WAT IS PRYS ELASTISITEIT VAN VRAAG?
PEV is die %▲ in die Qd indien die prys van die produk met 1% ▲
P
Q
%
%
EP OF DEMAND
The price elasticity of demand is
Formula:
Relative change
Measures consumer’s reaction to price change
EP VAN VRAAG
Die prys elastisiteit van vraag is
Formule:
Relatiewe verandering
Meet verbruikers reaksie op prys verandering
P
Q
productofPinchange
demandedQinchangeE DDp
%
%
%
%
5 CATEGORIES
Perfectly elastic any Q at one P
Perfectly inelastic any P at one Q
Unitary elastic %Q = %P
Relatively elastic %Q > %P
Relatively inelastic %Q < %P
5 KATEGORIEË
Volmaak elasties enige Q by een P
Volmaak onelasties enige P by een Q
Eenheids elasties %Q = %P
Relatief elasties %Q > %P
Relatief onelasties %Q < %P
Value of ANSWER Waarde van ANTWOORD
1
1
1
0
E
E
E
E
E
HOW DOES IT LOOK?
Perfectly elastic Any Q at one P E = I∞I
HOE LYK DIT?
Volmaak elasties Enige Q by een P E = I∞I
P
Q
Eeeeeelastic
HOW DOES IT LOOK?
Perfectly inelastic Any P at one Q E = 0
HOE LYK DIT?
Volmaak onelasties Enige P by een Q E = 0
P
Q
-nelastic
HOW DOES IT LOOK?
Unitary elastic Same % change in P&Q %Q = %P E = I 1 I
HOE LYK DIT?
Eenheids elasties Selfde % verandering in P&Q %Q = %P E = I 1 I
P
Q
P
Q
DEMAND / VRAAG SUPPLY / AANBOD
D
S2%P, 2%Q2/2 = 1
P
Q
%
%
HOW DOES IT LOOK?
Relatively elastic Q changes MORE than P %Q > %P E > I 1 I
HOE LYK DIT?Relatief elasties Q verander MEER as P %Q > %P E > I 1 I
P
Q
P
Q
DEMAND / VRAAG SUPPLY / AANBOD
D
S
2%P, 4%Q4/2 = 2
P
Q
%
%
HOW DOES IT LOOK?
Relatively inelastic Q changes LESS than P %Q < %P E < I 1 I
HOE LYK DIT?
Relatief onelasties Q verander MINDER as P %Q < %P E < I 1 I
P
Q
P
Q
DEMAND / VRAAG SUPPLY / AANBOD
D
S
4%P, 2%Q2/4 = 0.5
P
Q
%
%
POINT ELASTICITY
Elasticity value at a SINGLE point on a curve
PUNT ELASTISITEIT
Elastisiteits waarde by ‘n ENKELE punt op ‘n kurwe
Q
P
P
QE
‘CHEAT’ TABEL / ‘CHEAT’ TABLE
P Q
Punt: A
Punt: B
▲AB P A- P B QA-QB
ΣAB P A+ P B QA+QB
P Q
Punt: 1
Punt: 2
▲1,2 P 1- P 2 Q1-Q2
▲1,2
Σ1,2 P 1+ P 2 Q1+Q2
Σ1,2
Bereken:
•Punt-Elastisiteit by 1
•Punt-Elastisiteit by 2
•Boog-Elastisiteit van 1-2
Calculate:
•Point Elasticity at Point 1
•Point Elasticity at Point 2
•Arc Elasticity between Points 1-2
Voorbeeld / Example (Box9-1)
P Q
Punt: 1 10 17Punt: 2 8 19
▲1,2 P 1- P 2 Q1-Q2
▲1,2
Σ1,2 P 1+ P 2 Q1+Q2
Σ1,2
Bereken:
•Punt-Elastisiteit by 1
•Punt-Elastisiteit by 2
•Boog-Elastisiteit van 1-2
Calculate:
•Point Elasticity at Point 1
•Point Elasticity at Point 2
•Arc Elasticity between Points 1-2
Voorbeeld / Example (Box9-1)
P Q
Punt: 1 10 17Punt: 2 8 19
▲1,2 P 1- P 2 Q1-Q2
▲1,2 2 -2Σ1,2 P 1+ P 2 Q1+Q2
Σ1,2
Bereken:
•Punt-Elastisiteit by 1
•Punt-Elastisiteit by 2
•Boog-Elastisiteit van 1-2
Calculate:
•Point Elasticity at Point 1
•Point Elasticity at Point 2
•Arc Elasticity between Points 1-2
Voorbeeld / Example (Box9-1)
P Q
Punt: 1 10 17Punt: 2 8 19
▲1,2 P 1- P 2 Q1-Q2
▲1,2 2 -2Σ1,2 P 1+ P 2 Q1+Q2
Σ1,2 18 36
Bereken:
•Punt-Elastisiteit by 1
•Punt-Elastisiteit by 2
•Boog-Elastisiteit van 1-2
Calculate:
•Point Elasticity at Point 1
•Point Elasticity at Point 2
•Arc Elasticity between Points 1-2
Voorbeeld / Example (Box9-1)
Q
P
P
QE
P Q
Punt: 1 10 17Punt: 2 8 19
▲1,2 P 1- P 2 Q1-Q2
▲1,2 2 -2Σ1,2 P 1+ P 2 Q1+Q2
Σ1,2 18 36
Bereken:
•Punt-Elastisiteit by 1
•Punt-Elastisiteit by 2
•Boog-Elastisiteit van 1-2
Calculate:
•Point Elasticity at Point 1
•Point Elasticity at Point 2
•Arc Elasticity between Points 1-2
Voorbeeld / Example (Box9-1)
59.017
10
2
2
E
E
Q
P
P
QE
Elastic ∞
Relative E (1-∞)
Relative IE (0-1)
Inelasties (0)
Unitary E (1)
P Q
Punt: 1 10 17Punt: 2 8 19
▲1,2 P 1- P 2 Q1-Q2
▲1,2 2 -2Σ1,2 P 1+ P 2 Q1+Q2
Σ1,2 18 36
Bereken:
•Punt-Elastisiteit by 1
•Punt-Elastisiteit by 2
•Boog-Elastisiteit van 1-2
Calculate:
•Point Elasticity at Point 1
•Point Elasticity at Point 2
•Arc Elasticity between Points 1-2
Voorbeeld / Example (Box9-1)
42.019
8
2
2
E
E
Q
P
P
QE
Elastic ∞
Relative E (1-∞)
Relative IE (0-1)
Inelasties (0)
Unitary E (1)
ARC ELASTICITY
Elasticity over a SECTION of the curve
Use averages but ...
Simplified (trust me...)
BOOG ELASTISITEIT
Elastisiteit oor ‘n STUKKIE van die kurwe
Gebruik gemiddeldes maar ...
Vereenvoudig (glo my ...)
21
21
PP
P
QE
Q
P
P
QE
P Q
Punt: 1 10 17Punt: 2 8 19
▲1,2 P 1- P 2 Q1-Q2
▲1,2 2 -2Σ1,2 P 1+ P 2 Q1+Q2
Σ1,2 18 36
Bereken:
•Punt-Elastisiteit by 1
•Punt-Elastisiteit by 2
•Boog-Elastisiteit van 1-2
Calculate:
•Point Elasticity at Point 1
•Point Elasticity at Point 2
•Arc Elasticity between Points 1-2
Voorbeeld / Example (Box9-1)
Elastic ∞
Relative E (1-∞)
Relative IE (0-1)
Inelasties (0)
Unitary E (1)
5.036
18
2
2
E
E
Q
P
P
QE
PUNT / POINT
SONDER helling / WITHOUT slope
Met HELLING / With SLOPE
ARC / BOOG
SONDER helling / WITHOUT slope
Met HELLING / With SLOPE
Q
P
P
QE
Q
P
slopeE
1
Q
P
P
QE
Q
P
slopeE
1
WHAT IS ELASTICITY?
Why NB?
POINT vs. ARCFor ALL TYPES
ABSOLUTE valuesInterpretation
WAT IS ELASTISITEIT?
Waarom NB?
PUNT teenoor BOOGVir ALLE TIPES
ABSOLUTE waardesInterpretasie
PRICE ELASTICITY PRYS ELASTISITEIT
0 -1 +1
Volmaak ElastiesPerfectly Elastic
Relatief O-nelastiesRelatiively Inelastic
0-1
Relatief ElastiesRelatively Elastic
1 -
Relatief ElastiesRelatively Elastic
1-
Volmaak ElastiesPerfectly Elastic
EENHEIDS ElastiesUNITARY Elastic
1
EENHEIDS ElastiesUNITARY Elastic
1
Volmaak Onelasties
Perfectly Inelastic
Supply / AanbodDemand / Vraag
HUISWERK / HOMEWORK
EXERCISE
• Calculate the price elasticity of demand at a price of R84 and quantity of 20 if the slope of the demand curve is equal to -0,35.
OEFENING
• Bereken die prys elastisiteit van vraag by ʼn prys van R84 en hoeveelheid van 20 indien die helling van die vraagkurwe gelyk is aan -0,35.
ELASTICITYELASTISITEIT
MOHR & F
OURIE: C
HAPTER /
HOOFSTU
K 9
ECON121_2013
OUTCOMES
Types
Categories
Define
Calculate Point Arc
Interpret
Factors
Impact on actions Consumer Producer
UITKOMSTES
Tipes
Kategorieë
Definieer
Bereken Punt Boog
Interpreteer
Faktore
Impak op aksies van Verbruiker Produsent
EP & TR (TOTAL REVENUE)
How will a P impact on your TR?
Price ... Qty Price ... Qty
NB. What changes MORE?
TR = P x Q?TR = P x Q?TR = P x Q
EP & TR (TOTALE INKOME)
Hoe sal P jou TR beïnvloed?
Prys ... QtyPrys ... Qty
NB. Wat verander MEER?
TR = P x Q?TR = P x Q?TR = P x Q
TR @ P=18
TR @ P = 14
TR @ P = 10
FIG. 9-3
TR
R.Elastic ...TR
R.Inelastic ... TR
BOX 9-2 (TR) RAAM 9-2 (TR)
Ep < | 1 |
Relatief onelasties
Relatively inelastic
P > Q
TR volg P
TR follows P
Ep > | 1 |Relatief elasties
Relatively elastic
Q > PTR volg Q
TR follows Q
Ep = | 1 |Eenheids elasties
Unitary elastic
P = QTR onveranderd
TR unchanged
FIG.9-5 (D1)
UNITARY Elastic
Supply increases
Revenue???
FIG.9-5 (D1)
EENHEIDS Elasties
Aanbod vermeerder
Inkome???
S1
A0
S2
D1
P0 = 10
P1 = 7.50
Q0 = 15
Q1 = 20
FIG.9-5 (D2)
Relatively Inelastic
Supply increases
Revenue???
FIG.9-5 (D2)
Relatief Onelasties
Aanbod vermeerder
Inkome???
S1
A0
S2
D2 P0 = 10
P2 = 5
Q0 = 15
Q2 = 17
HOMEWORK
Suppose the demand for cigarettes in SA has been estimated as:
Qd = 6000 – 150P
Where Q is the number of packets of cigarettes demanded each year and P is the price in rand per packet.
Answer the following questions:
HUISWERK
Veronderstel die vraag na sigarette in SA word voorgestel as:
Qd = 6000 – 150P
Waar Q die aantal pakkies sigarette per jaar is wat aangevra word en P is die prys per pakkie.
Beantwoord die volgende vrae:
HOMEWORK
Question 1Complete the following table
HUISWERK
Vraag 1Voltooi die volgende tabel
P Qd TR
Price Elasticity
Prys Elastisitei
t
R5
R10
R15
R20
R25
R30
R35
HOMEWORK
Question 2If the current price of cigarettes is R15 per packet, what pricing strategy will increase producers TR?
Question 3If the current price of cigarettes is R25 per packet, what pricing strategy will increase producers TR?
HUISWERK
Vraag 2As die prys van sigarette R15
per pakkie is, watter prys strategie moet toegepas word sodat TR sal toeneem?
Vraag 3As die prys van sigarette R25
per pakkie is, watter prys strategie moet toegepas word sodat TR sal toeneem?
EP OF SUPPLY
The price elasticity of supply is …
Formula:
Relative change
Measures producer’s reaction to price change
EP VAN AANBOD
Die prys elastisiteit van aanbod is…
Formule:
Relatiewe verandering
Meet produsent se reaksie op prys verandering
P
QE SDp
%
%
productofPinchange%
suppliedQinchange%
EY OF DEMAND
The income elasticity of demand is …
Formula:
Relative change
Measures consumer’s reaction to change in income
EY VAN VRAAG
Die inkome elastisiteit van vraag is …
Formule:
Relatiewe verandering
Meet verbruikers reaksie op inkome verandering
Y
QE DY
%
%
income sconsumer'in change %
product of demanded Qin change %
INCOME ELASTICITY INKOME-ELASTISITEIT
0 +1
InferiorMinderwaardig
NecessityNoodsaaklik
LuxuryLuuks
Volmaak ElastiesPerfectly Elastic
Volmaak ElastiesPerfectly Elastic
∞ ∞
Volmaak OnelastiesPerfectly Inelastic
Normale goedere
EY OF DEMAND
Joanne kry ‘n 15% salaris verhoging en haar EY
D = -0.35 vir Steers Hamburgers. Bereken die impak van hierdie salaris verhoging op haar vraag na Steers Hamburgers en verduidelik watter tipe produk sy dit klassifiseer as.
EY VAN VRAAG
Joanne receives a 15% salary increase and her EY
D = -0.35 for Steers Hamburgers. Calculate how her salary increase will affect her demand for Steers Hamburgers and as what type of product she classifies it.
EY OF DEMAND
Joanne kry ‘n 15% salaris verhoging en haar EY
D = -0.35 vir Steers Hamburgers. Bereken die impak van hierdie salaris verhoging op haar vraag na Steers Hamburgers en verduidelik watter tipe produk sy dit klassifiseer as.
EY VAN VRAAG
Joanne receives a 15% salary increase and her EY
D = -0.35 for Steers Hamburgers. Calculate how her salary increase will affect her demand for Steers Hamburgers and as what type of product she classifies it.
25.515*35.0%15
%35.0
%
%
Q
QY
QE DY
25.515*35.0%15
%35.0
%
%
Q
QY
QE DY
Minderwaardige produk Inferior product
OUTCOMES
Types
Categories
Define
Calculate Point Arc
Interpret
Factors
Impact on actions Consumer Producer
UITKOMSTES
Tipes
Kategorieë
Definieer
Bereken Punt Boog
Interpreteer
Faktore
Impak op aksies van Verbruiker Produsent
EXP OF DEMAND
The cross price elasticity of demand is …
Formula:
Relative change
Measures consumer’s reaction to price change of related goods
EXP VAN VRAAG
Die kruis prys elastisiteit van vraag is…
Formule:
Relatiewe verandering
Meet verbruikers reaksie op prys verandering van verwante produkte
B
DAD
xp P
QE
%
%
Bproduct of P in the change %
Aproduct of demanded Q in the change %
CROSS PRICE ELASTICITY KRUIS-PRYS-ELASTISITEIT
0
KOMPLEMENTE
Pa Qa Qb
Pa Qa Qb Teenoorgestelde Effek
(Pa,Qb)
SUBSTITUTE
Pa Qa Qb
Pa Qa Qb Dieselfde Effek
(Pa,Qb)
─ +
DETERMINANTS (DEMAND)DETERMINANTE
(VRAAG)
DETERMINANTS (SUPPLY) DETERMINANTE (AANBOD)
SOUTH AFRICAN WORKBOOK FOR ECONOMICS • Chapter 3
Question 3 Question 10