market price and elasticity must know the determinants of demand and supplymust know the...
TRANSCRIPT
Market Price and ElasticityMarket Price and Elasticity
• Must know the determinants of demand and Must know the determinants of demand and supplysupply
• Must know the formula for price elasticity of Must know the formula for price elasticity of demanddemand
• Should understand how demand and supply Should understand how demand and supply affect the market priceaffect the market price
• Should understand how the demand and Should understand how the demand and supply curves show elasticitysupply curves show elasticity
• Could be able to link demand and supply to Could be able to link demand and supply to elasticityelasticity
Determinants of DemandDeterminants of Demand
• TastesTastes
• SubstitutesSubstitutes
• Complementary goodsComplementary goods
• IncomeIncome
• Distribution of incomeDistribution of income
• Expectations of future price changesExpectations of future price changes
Determinants of SupplyDeterminants of Supply
• Costs of productionCosts of production• The profitability of substitutesThe profitability of substitutes• The profitability of goods in joint supplyThe profitability of goods in joint supply• Nature, random shocks and other Nature, random shocks and other
unpredictable eventsunpredictable events• Aims of producersAims of producers• Expectations of future price changesExpectations of future price changes• Number of suppliersNumber of suppliers
Price Elasticity of DemandPrice Elasticity of DemandQuantityQuantity % Change in % Change in
QuantityQuantityPricePrice % Change in % Change in
PricePricePEDPED
1010 00
99 11
88 22
77 33
66 44
55 55
44 66
33 77
22 88
11 99
00 1010
Price Elasticity of SupplyPrice Elasticity of SupplyQuantityQuantity % Change in % Change in
QuantityQuantityPricePrice % Change in % Change in
PricePricePESPES
1010 00
99 11
88 22
77 33
66 44
55 55
44 66
33 77
22 88
11 99
00 1010