Demand function and elasticity of demand 1

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1. Demand function and elasticity of demand 1
2. Demand - the number of units of
3. Measuring the elasticity with respect to changes
4. The basic demand function establishes the relationship
5. There is difference between the changes in
6. Price changesThe increase in income normal product
7. When I talk about market demand or
8. Qx = 5 – 10 Px +
9. Qx = 5 – 10 Px +
10. Qx = 5 – 10 Px +
11. Elasticity of demand
12. If we lower the product’s price, then
13. The elasticity of any function is defined
14. Theoretically, the demand function has an elasticity for each of it’s many variables
15. 4 main types of elasticity of demand:Price
16. Price elasticity of demand is defined as
17. 2 types of elasticity measurement :Direct measurement
18. point elasticityIn the case of point elasticity
19. Qx = 30 – 2 PxThe price elasticity at the point Рх = 6?
20. Arc elasticityThe demand function may be unknown.
21. Слайд 21
22. Point elasticity is the limit concept, because
23. The coefficient of price elasticitySignQuantityDetermines the degree
24. Скачать презентанцию

Demand - the number of units of a particular product that consumers are willing and able to buy at clearly defined conditions of time, place, price.. Demand is a function of

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Demand function and elasticity of demand 1

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Слайд 1Demand function
and
elasticity of demand

Слайд 2Demand
- the number of units of a particular product

that consumers are willing and able to buy at clearly

defined conditions of time, place, price..

Demand is a function of many independent variables or determinants of demand

Elasticity of demand
– the sensitivity of the required quantity to changes in the determinants of demand

Demand - the number of units of a particular product that consumers are willing and able to

Слайд 3Measuring the elasticity with respect to changes in price, income,

or prices of other products can help managers when planning

marketing strategies

business plan

lending
division

Measuring the elasticity with respect to changes in price, income, or prices of other products can help

Слайд 4The basic demand function establishes the relationship between the required

number of product units and all variables affecting demand
The demanded

quantity

Price

Other determinants of demand, which remain constant

Price effect

Function of market demand is the sum of all the individual functions of consumer demand in this market

The basic demand function establishes the relationship between the required number of product units and all variables

Слайд 5There is difference between the changes in the required quantity

(quantity of demand) and changes in demand:
Only price => changes

in quantity of demand

Other variables => changes demand function

There is difference between the changes in the required quantity (quantity of demand) and changes in demand:Only

Слайд 6Price changes
The increase in income normal product (D2)‏
The increase in

income,
low-quality product (D3)‏
changes in quantity of demand
changes in demand
Price
Price
Quantity

demanded for period

Quantity demanded for period

Price changesThe increase in income normal product (D2)‏The increase in income, low-quality product (D3)‏changes in quantity of

Слайд 7When I talk about market demand or the demand curve,

these terms relate to demand only as a function of

prices, assuming that other variables are constant

Of course, the demand can be expressed by function of any other single variable

When I talk about market demand or the demand curve, these terms relate to demand only as

Слайд 8Qx = 5 – 10 Px + 15 Py –

25 Pz + 0,001i
Annual consumption of Swiss cheese brand X

(kg) per family

The price for 1 kg of Swiss cheese brand X

The price for 1 kg of cheese of competing brands

The price per pack of crackers

Average annual family income

Qx = 5 – 10 Px + 15 Py – 25 Pz + 0,001iAnnual consumption of Swiss

Слайд 9Qx = 5 – 10 Px + 15 Py –

25 Pz + 0,001i
Px = 2,50$
Py = 3$
Pz = 1$
I

= 30000$

Qx = 5 – 10 Px + 15 Py – 25 Pz + 0,001iPx = 2,50$Py =

Слайд 10Qx = 5 – 10 Px + 15 Py –

25 Pz + 0,001i
Px = 2,50$ Py = 3$

Pz = 1$ I = 30000$

Qx = (5 + 45 – 25 + 30) – 10 Рх
Qx = 55 – 10 Px

Qx = 5 – 10 Px + 15 Py – 25 Pz + 0,001iPx = 2,50$

Слайд 11Elasticity of demand

Слайд 12If we lower the product’s price, then we know that

sales will increase, but for how much?
What will be the

dynamics of sales, if you increase the income of the consumer?

What will happen with sales if you increase the advertising budget?

If we lower the product’s price, then we know that sales will increase, but for how much?What

Слайд 13The elasticity of any function is defined as the percentage

change of the dependent variable Y,
which is caused by

1% change (or a relatively small change) in the independent variable X, provided that all other independent variables remain constant

The elasticity of any function is defined as the percentage change of the dependent variable Y, which

Слайд 14Theoretically, the demand function has an elasticity for each of

it’s many variables

Слайд 154 main types of elasticity of demand:
Price elasticity of demand

- measures the responsiveness of sales to changes in prices
Income

elasticity of demand - measures the responsiveness of sales to changes in income of the consumer

Cross-elasticity of demand - measures the responsiveness of the sales of one product to changes in the price of another product

The elasticity of demand for advertising - measures the responsiveness of sales to changes in the amount of money spent on advertising and promotion of goods on the market

4 main types of elasticity of demand:Price elasticity of demand - measures the responsiveness of sales to

Слайд 16Price elasticity of demand is defined as the percentage change

in the required quantity, which is caused by change of

1% in price, while all other variables remain constant

The amount of product X

X product price

Price elasticity of demand is defined as the percentage change in the required quantity, which is caused

Слайд 172 types of elasticity measurement :
Direct measurement at a specific

point using the formula for point elasticity
A measurement of the

average elasticity in an arc or segment of the demand curve using the formula for arc elasticity

2 types of elasticity measurement :Direct measurement at a specific point using the formula for point elasticityA

Слайд 18point elasticity
In the case of point elasticity demand function must

be known.
If we want to have the exact slope

at a particular point on the demand curve, we assume that ∆Рх tends to zero

Hence the condition that serves as a definition of the derivative

point elasticityIn the case of point elasticity demand function must be known. If we want to have

Слайд 19Qx = 30 – 2 Px
The price elasticity at the

point Рх = 6?

Слайд 20Arc elasticity
The demand function may be unknown.
We are interested

in a larger segment of the demand curve

Arc elasticityThe demand function may be unknown. We are interested in a larger segment of the demand

Слайд 21

Слайд 22Point elasticity is the limit concept, because it measures the

elasticity at a specific point on the demand curve. Can

be used to analyse the effect of very small changes in price

Arc elasticity is a broader concept that allows to measure the average elasticity over a wide range of changes in the price

ЕХ:

Point elasticity is the limit concept, because it measures the elasticity at a specific point on the

Слайд 23The coefficient of price elasticity
Sign
Quantity
Determines the degree of sensitivity
+
Variables move

in the same direction
__
Variables move in opposite direction
|ɛ| = 1

–the function of specific elastic: change in price by 1% can cause a change in the required amount by 1%
|ɛ| > 1 –the elastic function: the change in price by 1% can cause a change in the required number by more than 1%
|ɛ| < 1 –inelastic function: the change in price by 1% can cause a change in the required number by less than 1%