Beruflich Dokumente
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Demand Elasticity
Variation of Elastic Unit Elastic Inelastic
Price > 1 = 1 <1
Increase of Decrease of Expense Increase of
price Expense doesn’t change Expense
Decrease of Increase of Expense Decrease of
price Expense doesn’t change Expense
Initial Price = P1
Final Price = P2
Initial Quantity = Q1
Final Quantity= Q2
(Q2 - Q1)
PEoD = (Q1 + Q2) / 2
(P2 – P1)
(P1 + P2) / 2
= | -1.6 | = 1.6
= | -.55 | = .55
= | -1 | = 1
Proof:
Q1= 200
Q2= 180
P1= 2
P2= 2.5
(Q2 - Q1)
PEoD = (Q1 + Q2) / 2
(P2 – P1)
(P1 + P2) / 2
= | -.474 | = .474
(Q2-Q1)
PEoS= (Q2+Q1)/2
(P2 – P1)
(P2 + P1)/2
(Q2-Q1) (6-2) 4
PEoS= (Q2+Q1)/2 = (6+2) /2 = 4 = 1 = 1.5
(P2 – P1) (2-1) 1 .666
(P2 + P1)/2 (2+1) /2 1.5
1.5 > 1 , it is elastic supply
(Q2-Q1) (3-2) 1
PEoS= (Q2+Q1)/2 = (3+2) /2 = 2.5 = .4 = .6
(P2 – P1) (2-1) 1 .666
(P2 + P1)/2 (2+1) /2 1.5
.6 < 1 , it is inelastic supply
(Q2-Q1) (4-2) 2
PEoS= (Q2+Q1)/2 = (4+2) /2 = 3= .666 = 1
(P2 – P1) (2-1) 1 .666
(P2 + P1)/2 (2+1) /2 1.5