1. Price Elasticity of Supply is a measure used in economics to show the responsiveness and elasticity of the quantity supplied.
2. Measure responsiveness of quantity semand of a product to a change in the price of product
3. if a consumer wants to travel to another country just because of their habits for example buying perfumes in Paris rather than buying it in their own country, their demand will be inelastic because their habits towards perfume have become necessity to them.
4. 2. share of budget spent on the product.
4.1. definition: if consumer has to spent a large portion of their income or budget on a tourism package, its demand will be elastic. if the consumer has to spent less portion of their income, the demand will turn to be inelastic.
5. ) 4.The price elasticity of supply is determined by: 1..Number of producers: ease of entry into the market. 2.Spare capacity: it is easy to increase production if there is a shift in demand. 3.Ease of switching: if production of goods can be varied, supply is more elastic. 4.Ease of storage: when goods can) be stored easily, the elastic response increases demand. Length of production period: quick production responds to a price increase easier. Time period of training: when a firm invests in capital the supply is more elastic in its response to price increases.
6. 1. Technology advancements - the number of output produced in give period of time is lower when old methods of production are used.
7. Cross Elasticity of Demand (CED)_ Group 4
7.1. Definition
7.1.1. The ratio of % change in the quantity demanded of a good service to a given % change in the price of a related good
7.1.1.1. % change in quantity of good A demanded / % change in price of good B
8. Cross Elasticity of Demand
9. Defination
9.1. %change in quantioty supply / % change in price
10. Determinant
10.1. 3. Availability and mobility of factors of production - when factors of production such as land, labour and capital are available, supply tends to be more elastic.
10.2. 2. Time dimension - influences the elasticity of supply. In short term, supply tends to be inelastic due to insufficient time to organise and adjust supply to demand.
10.3. 5. Perishability - changes in price do not effect supply because seller cannot store perishable products for long term.
11. Income Elasticity of Demand (IED)_Group 2
11.1. Types of Ey 1) Normal Good - Ey is positive * An increase in the income would increase the quantity demanded at each price 2) Inferior Good - Ey is negative * An increase in the income would decrease the quantity demanded at each price
12. Price Elasticity Of Supply (PES) Group 3
13. Past Year Question 1_GROUP 5
13.1. for example: if the consumer can buy a flight ticket for a business class so the demand tend to be elastic which means consumers would response significantly to a fall in its price by demanding more of it.
13.2. Define price elasticity of demand.
13.2.1. the responsiveness of quantity demanded of a product to a change in the product's own price .
13.3. Four (4) determinants of price of elasticity of demand for tourism packages.
13.3.1. 1. availability of products.
13.3.1.1. for example: if the price of a particular travel company of travel packages increases, the quantity demanded for it will fall by a larger percentage because there are many other travel company of substitutes travel package.
13.3.2. 3. types of the product.
13.3.3. 4. habits.
14. Formula for price elasticity of supply
15. Elasticity = % change in quantity/%change in price
16. Economic Theory. Price increase = Supply of good increase. Price decrease = Supply of good decrease
17. Example question of supply
18. Interpretation of CED
18.1. POSITIVE SIGN ( 1 < eX > 0 )
18.1.1. Demand for one good will increase if the price of the other good increase
18.1.2. Example: Subtitute goods (orange juice & apple juice; beef and lamb)
18.2. NEGATIVE SIGN ( 1 < eX > 0 )
18.2.1. Demand for one good will increase if the price of the other good decrease
18.2.2. Example : Complementary goods (Coffee & skimmed milk entertainment & food)
18.3. eX = 0
18.3.1. Demand for one good is not affected when there is a changes in the price other good
18.3.2. Example: Two goods are not related (Cloths & Bicycle, Cutlery & Air-Conditioner
19. Income elasticity of demand measures the relationship between a change in quantity demanded for good X and a change in real income.
20. Elastic demand is when price or other factors have a big effect on the quantity consumers want to buy. You'll see it most often when consumers respond to price changes. If the price goes down just a little, they'll buy a lot more. If prices rise just a bit, they'll stop buying as much and wait for them to return to normal
21. 4. Nature of market- when products cam be sold in different markets, supply becomes more elastic.
21.1. Relationship between Total Revenue and Elasticity
21.1.1. Elastic Demand
21.1.1.1. Positive sign : demand for one good will increase if the price of the other goods increase.
21.1.2. Inelastic demand in economics is when people buy about the same amount whether the price drops or rises. That happens with things people must have, like gasoline
21.1.3. Inelastic Demand
21.1.4. Unitary Elastic Demand
22. Interpretation
22.1. If greater than 1.0, elastic If equal to 1.0, unitary elastic If less than 1.0, inelastic
23. def
24. Determinant
25. Price Elasticity of Demand (PED)_Group 1
25.1. Definition
25.1.1. Measure responsiveness of Quantity Demand of a product to a change in the price of product.
25.2. Degree
25.2.1. 1. Fairly Elastic
25.2.1.1. Demand is said to be fairly elastic when the coefficient is >1. The percentage 🔺 in Quantity Demand is greater than the percentage 🔺 in price
25.2.2. 2. Fairly Inelastic
25.2.2.1. Demand is inelastic if the coefficient is <1. The percentage 🔺 in Quantity Demand is smaller than the percentage 🔺 in price.
25.2.3. 3. Unitary Elastic
25.2.3.1. Demand exist if the coefficient is =1. Percentage 🔺 in Quantity Demand is equal to the percentage 🔺 in price.
25.2.4. 4. Perfectly Elastic
25.2.4.1. Demand is refers to a demand which is super sensitive to a price 🔺. A small percentage 🔺 in price brings about an infinite to percentage 🔺 in Quantity Demand.
25.2.5. 5. Perfectly Inelastic
25.2.5.1. Demand has coefficient of 0. This means that Quantity Demand does not 🔺 as the price 🔺.
25.3. Determinants
25.3.1. 1. Availability of substitutes
25.3.1.1. Demand is elastic, if the product have many substitute and inelastic if it has few substitute. Eg : if the price of a particular brand detergent increases the quantity demanded for it will fall by a larger % bcs there are many other brand of substitute detergents.
25.3.2. 2. Share of budget spent on the product
25.3.2.1. If consumer a large portion of their income or budget on a product its demand will be elastic otherwise the demand will be inelastic.
25.3.3. 3. Types of the product
25.3.3.1. For luxuries, the demand will be elastic, but for necessities or essential the demand will be inelastic.
25.3.4. 4. Habits
25.3.4.1. If the demand for a product is associated with some habit, eg: cigarette with smoking or alcohol drinking habits, their demand will be inelastic bcs these products hve become necessities for them. Therefore, a price increase.
25.3.5. 5. Time
25.3.5.1. In a short period of time, the demand may be inelastic bcs of difficulties in finding substitutes or bcs customers do not hve enough time to make adjustments to a price 🔺.
26. Past Year Questions 2 _ Group 6
26.1. Jan 2018, Part C, Question 1 (b)
26.1.1. Define income elasticity of demand and how income can be used to classify the type of goods in the market.
26.1.1.1. Ey = percentage change in demand
26.1.1.2. If normal goods, Ey would be positive. And increase in the normal income would be increase the quantity demanded of each price. If inferior goods, Ey would be negative. An increase in the income would decrease the quantity demanded at each price.
26.1.1.3. The percentage change in demand for any goods , holding its price constant, divided by the percentage change in income.