application of supply and demand

2 lists

restrictions?

going wireless??

December 2000

• One in four Canadians have a cell phone
• Number of users in Canada increasing by about 4700 a day
• By 2003, phone sales are to tripple
• Next generation phones will have internet access and voice communication!

January 2014

• 90% of Canadians have cell phones
• 58% of which are smart phones
• 34% of internet users mostly use cell phone for access

elastcitiy

people buy less/more for different reasons

you can calculate change in quantity demanded

price of elasticity of demand

effect of change in numerator

cause is denominator

bourj hammoud pancakes

They used to charge $1.00 for each pancake. Now they want to charge $1.04. At our original cost, they sold 2400 pancakes, but at the new cost they only sell 2200.

use original or new %??

this will be our denominator!

same deal for quantity demanded

take mid point of 2400 and 2200... 2300

our numerator!

now we can calculate coefficient of demand

inelastic coefficient

change in price has a small change in quantity demanded

elastic coefficient

unitary coefficient

question 1 only

total revenue approach

will total revenue rise or fall??

will a rise in price increase revenue

if elasticity coefficient is inelastic

if inelastic

different with elastic coefficient

unitary coefficient

fig 5.2 pg 97

factors affecting demand elasticity

availability of substitutes

Goods that have substitutes are usually more elastic than goods that do not. A specific brand of chocolate bar is usually very elastic. Lots of other chocolate bars available, consumers will buy less if manufacturer raises prices sharply.

demand for chocolate in general is inelastic

Nature of the item

veggies

trip to south beach miami?

fraction of income spent on item

'big-ticket' items

if these get too expensive

what about chewing gum?

amount of time available

could be inelastic in short term

When the price of gasoline rises, car owners initially may reduce the amount of driving they do, but not significantly. However, if gas prices remain high over a long period of time, drivers may switch to smaller cars in order to reduce gas consumption.