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    Percentage Change in Quantity - High Price Elasticity Indicate That The Quantity Demanded Varies So Much As Price Change and Vice Versa

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    Ehab Hosny
    The document discusses price elasticity of demand and supply. It defines price elasticity of demand and supply, and outlines the different types of elasticities and how they relate to total revenue and price changes. It also lists the key determinants of price elasticity of demand and the factors that affect elasticity of supply.

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    Percentage Change in Quantity - High Price Elasticity Indicate That The Quantity Demanded Varies So Much As Price Change and Vice Versa

    Uploaded by

    Ehab Hosny
    16 views3 pages
    The document discusses price elasticity of demand and supply. It defines price elasticity of demand and supply, and outlines the different types of elasticities and how they relate to total revenue and price changes. It also lists the key determinants of price elasticity of demand and the factors that affect elasticity of supply.

    Original Title

    Chapter 4

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    The document discusses price elasticity of demand and supply. It defines price elasticity of demand and supply, and outlines the different types of elasticities and how they relate to total revenue and price changes. It also lists the key determinants of price elasticity of demand and the factors that affect elasticity of supply.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    16 views3 pages

    Percentage Change in Quantity - High Price Elasticity Indicate That The Quantity Demanded Varies So Much As Price Change and Vice Versa

    Uploaded by

    Ehab Hosny
    The document discusses price elasticity of demand and supply. It defines price elasticity of demand and supply, and outlines the different types of elasticities and how they relate to total revenue and price changes. It also lists the key determinants of price elasticity of demand and the factors that affect elasticity of supply.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Chapter 4

    Price Elasticity of demand: is the percentage change in quantity demanded for a


    percentage change in quantity
    - High price elasticity indicate that the quantity demanded varies so much as
    price change and vice versa
    Rule PED = % change in quantity demand / % change in price
    Q 2−q 1
    ∗100
    q1
    P 2−P 1
    ∗100
    P1

    Types of price elasticity


    Price elasticity and total revenue
    Elasticity Total revenue Price change
    Elastic Increase Decrease
    Decrease Increase
    Unitary elastic Increase No change
    Decrease No change
    Inelastic Increase Increase
    Decrease decrease

    Determinant of price elasticity of demand


    1- Availability of substitute goods : the more and closer the substitute
    available the higher the elasticity is likely to be
    2- Breadth of definition of a good :the broader the definition of a good the
    low the elasticity
    3- Percentage of income : the higher the percentage of the consumer’s
    income the he product’s represents the higher the elasticity
    4- Necessity : the more necessary a good is the lower the elasticity
    5- Duration : the longer a price change holds the higher the elasticity
    6- Brand loyalty : an attachment to a certain brand result in more inelastic
    demand
    Price elasticity of supply
    Rule PES = % change in quantity supplied / % change in price
    Q 2−q 1
    ∗100
    q1
    P 2−P 1
    ∗100
    P1
    Factors affect the elasticity of supply
    1- Spare production capacity
    2- Stocks of finished products
    3- Cost of factors substitution
    4- Time period and production speed
    Income elasticity
    Rule IE = % change in quantity demand / % change in income
    Cross price elasticity
    CED = % change in quantity demanded in good A / % change in price of other
    good

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