100 Days Commerce Pro Series - Lecture Notes

Economics - Elasticity of Demand

• The theory of elasticity of demand was covered in the previous class.
• Today, the focus will be on the numerical portion.
• The entire section on production will be completed tomorrow.
• After cost next week, we will move towards statistics.

Syllabus Information

• The preliminary chapters of micro and macro have already been covered.
• In some boards, microeconomics is in the 11th grade and in some it is in the 12th grade.

Numericals on Elasticity of Demand

• Formula:
  • Percentage Method:
    • % Change = (ΔQ / Q) * 100
    • % Change = (ΔP / P) * 100
  • Proportional Method:
    • E_d = (ΔQ / ΔP) * (P / Q)*

First Question

• Price at 10 per unit, demand 100 units.
• Price at 8 per unit, demand 150 units.
• ΔP = 8 - 10 = -2
• ΔQ = 150 - 100 = 50
• Elasticity (E_d) = (ΔQ / ΔP) * (P / Q) = (50 / -2) * (10 / 100) = -2.5
  • Note: The negative sign indicates an inverse relationship (between price and quantity demanded).

Second Question

• Demand 300 units, price was 20, then increased to 22.
• Demand dropped to 240 units.
• ΔP = 22 - 20 = 2
• ΔQ = 240 - 300 = -60
• E_d = (-60 / 2) * (20 / 300) = -2*

Third Question

• Price 5, demand 100 units.
• Elasticity is 2, new quantity 140 units.
• ΔQ = 40
• ΔP = ?
• E_d = ΔQ / ΔP * (P / Q)
• New price (p1) = 4.*

Fourth Question

• Price at 10 per unit, demand 40 units.
• Price fell from 5 to 0.
• ΔP = -5
• E_d = 3
• Determine ΔQ.
• New demand = 100.

Final Question

• Price 10, demand 20.
• Price fell from 10 to 0.
• New demand 22 units.
• E_d = (% change) = 1.

Conclusion

• Both methods can be used in the numericals of elasticity.
• The next class will focus on production.

Thank You

• Thank you to all the students, see you in the next class.