Y12 Economics
Elasticity
07/10/10 - Mr Davis
Starter
• Calculate the PED for the example below:
• Demand
• 2008 = 45,820 units
• 2009 = 40,277 units
• Price
• 2008 = £17.99
• 2009 = £20
Learning Outcomes:
I can define and calculate income elasticity of demand; I can define and calculate cross elasticity of demand; I can
identify factors affecting demand-based elasticities
12.10% fall
= 1.08
11.17% rise
Learning Outcomes:
I can define and calculate income elasticity of demand; I can define and calculate cross elasticity of demand; I can
identify factors affecting demand-based elasticities
Learning Outcomes
• Iofcan
define and calculate income elasticity
demand
• Idemand
can define and calculate cross elasticity of
• I can identify demand-based elasticities
Learning Outcomes:
I can define and calculate income elasticity of demand; I can define and calculate cross elasticity of demand; I can
identify factors affecting demand-based elasticities
Income Elasticity
• What is it?
• What might affect it?
Learning Outcomes:
I can define and calculate income elasticity of demand; I can define and calculate cross elasticity of demand; I can
identify factors affecting demand-based elasticities
Income Elasticity
• The
responsiveness of demand to a change
in income
% ∆ in demand
y
E
=
d
% ∆ in income
Learning Outcomes:
I can define and calculate income elasticity of demand; I can define and calculate cross elasticity of demand; I can
identify factors affecting demand-based elasticities
Application
• Inyougroups,
decide how the product/service
have been given may be affected by a
rise and then a fall in incomes
2 different sections
•
•
•
Rise in income
Fall in income
Learning Outcomes:
I can define and calculate income elasticity of demand; I can define and calculate cross elasticity of demand; I can
identify factors affecting demand-based elasticities
Factors affecting YED
• Make
a list of the factors you think could
affect YED
Learning Outcomes:
I can define and calculate income elasticity of demand; I can define and calculate cross elasticity of demand; I can
identify factors affecting demand-based elasticities
Application
2006
2007
A
Demand = 14,000
Income = £17,000
Demand = 40,000
Income = £30,000
B
Demand = 145,000
Income = £24,300
Demand = 140,000
Income = £20,000
C
Demand = 72,650
Income = £45,500
Demand = 85,000
Income = £48,000
Learning Outcomes:
I can define and calculate income elasticity of demand; I can define and calculate cross elasticity of demand; I can
identify factors affecting demand-based elasticities
Cross Elasticity
• The
responsiveness of demand to a change
in price of another product/service
% ∆ in demand of good x
x
E
=
d
% ∆ in price of good y
Learning Outcomes:
I can define and calculate income elasticity of demand; I can define and calculate cross elasticity of demand; I can
identify factors affecting demand-based elasticities
Types of goods
• What are the two main types of ‘other’ goods
• Think of two examples for each
Learning Outcomes:
I can define and calculate income elasticity of demand; I can define and calculate cross elasticity of demand; I can
identify factors affecting demand-based elasticities
Compliments vs Substitutes
• SUBSTITUTES
• An
increase in the price of a substitute would
likely result in an increase in demand of your
•
•
product
Higher coefficient
Little brand loyalty
High consumer knowledge
Close substitutes
Coefficient is always positive for substitutes
•
•
•
Learning Outcomes:
I can define and calculate income elasticity of demand; I can define and calculate cross elasticity of demand; I can
identify factors affecting demand-based elasticities
Compliments vs Substitutes
• COMPLIMENTS
• Two goods that compliment each other
•
•
e.g Blu-Rays and HD-TVs
Coefficient is always negative
Learning Outcomes:
I can define and calculate income elasticity of demand; I can define and calculate cross elasticity of demand; I can
identify factors affecting demand-based elasticities
Application
• Complete
the activity about ALCo on
Uniservity
• Economics
> Resources > Mr Davis > ALCo
elasticities
Learning Outcomes:
I can define and calculate income elasticity of demand; I can define and calculate cross elasticity of demand; I can
identify factors affecting demand-based elasticities