Elasticity of Supply The contrast between the two outcomes in Figure 4.9 highlights the need for A measure of the responsiveness of the quantity supplied to a price change.
{"Image DocumentName": "Price Elasticity of Demand", "Image ImageDescription": "Calculating Elasticity. The price elasticity of demand is calculated by using the formula: Percentage change in quantity demanded. Percentage change in price. Percentages and percentage changes. Many students need a refresher and some practice at doing what seems too simple to bother with, calculating percentages and percentage changes. Don\u2019t be afraid to start with this pre-elasticity warm up. Just toss out some numbers. Suppose that the campus bookstore increases the price of an economics text from  70 to  80. What is the percentage increase in price? Suppose the campus computer store lowers the price of an iMac from  1500 to  1000. What is the percentage decrease in price? Next, tell them the prices have moved in the opposite directions: The campus book store cuts the price of an economics text from  80 to  70. What is the percentage decrease in price? And the campus computer store now raises the price of an iMac from  1000 to  1500. What is the percentage increase in price? You\u2019re now all set to get the students using the average of the original and new price to calculate percentages that are independent of the direction of change. Many students have a hard time remembering whether quantity or price goes in the numerator of the elasticity formulas. Have the students create their own mnemonic. Suggest McDonald\u2019s Big Mac\u2122 hamburgers. It\u2019s silly, but it works, reminding the student that Q (quantity) appears before P (price) in the ratio of percentage changes. For practice at calculating the price elasticity of demand, bring out your demand schedule for Coke (or other drink) that you sold in class when you covered demand. Get the students to calculate the price elasticity of demand at various points along that demand curve.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}