Microeconomics
① PED Graphs
1. Elastic PED 2. Inelastic PED
PED > 1. Consumers are sensitive PED< 1. C
price to a
change in price .
Price insensitive
^ B
Pz
lowering Raising pr
•
A pricefromp,→pz %
v1:X
•
demand to extend from A demand to
Bp cause P, •
•
I
a ,→az .
↳A
↳ This
increase in
causes an
revenue
% ☐ grea
there
° 0 QZQ '
Qi
z Quantity Reds Green <
Quantity
3.
Unitary PED graph ② Income
elasticity of d
price Consumers are invariant to
YED : Income
a
change 'm price .
1- decrease
elasticity measures consume
demanded due
P inpricefromp ,→Pz causes sensitivity to
quantity
percentage change
'
price
%
in
an
equal change in revenue a .
vpz
, due to the extension of demand
Positive
% from Qz YED means the good
→
°
↳ Revenue is maximised is normal
good ↳ As income increases
QQ
} Quantify ataprice where PED -0 demand for the good incre
Red -_ Green
.
YED : % change in quantity demanded
%
change in income
Duringaboom :
During a recession :
Iphone Vpro ( normal good)
As incomes increase due magma , go.at?Inc0mesarefatliY Infe
Price to the boom D→A price Price
s
.
^Pi This increase in demand with
the ^P
PE higher price means ,
>
,,
peuenueforfhefinm increases upp; pe
D
D,
D
O
Qe Quantity ◦ °
QQE
a
Quantity
Price ↳A
③
elasticity of supply ↳ Asincomefallsdemand
shifts inwards from infer
PES : Measures the sensitivity of producers D-> A. This cause price D→D
to a
change in market price total/ and quantity revenu
, Government Intervention
③ Tax ⑥ Subsidy
price
RABB -
- Total tax revenue
price
s
's Ss
4-
<
=
T.axpaid.by consumers subsidy
Per
p, %
,
tax p, unit PE
Per
MY
Taxpaidby producers
pe
•
B p • ☐
unit -_
,
pz
sold
☐ his new higher consumer price p
◦
his new higher producer price
" °
QEQ
Quantity , Q
Quantity demand contracts from BTOA Quantity demandextenlsass
as demand decreases from Qe→Q ,
by the increase in quantity :Q
Price controls :
⑦ Price ceiling /Mox Price ⑧ Price floor /minim
Price Price
s Duetothemaxpricea market s
disequilibrium ofexcessdemand P' Pm
will result CQD Qs ) -
PE
Pma× %
Pi ↳ This cause
maythe buying /
D selling through illegal market D
°
Qua
°
QGQEQD Quantify QDQE Qs
Market failure :
④ Business behaviour :
Price
⑨ Public
goods :
<
S
PE
Price D. → Dioccursduetosome
VPI
s
consumers
trying to free ride
D
"
↳ AMF of underproduction D,
And under consumption results 0
V P
PE
,
a.
C
Qe
Quantify
D
① PED Graphs
1. Elastic PED 2. Inelastic PED
PED > 1. Consumers are sensitive PED< 1. C
price to a
change in price .
Price insensitive
^ B
Pz
lowering Raising pr
•
A pricefromp,→pz %
v1:X
•
demand to extend from A demand to
Bp cause P, •
•
I
a ,→az .
↳A
↳ This
increase in
causes an
revenue
% ☐ grea
there
° 0 QZQ '
Qi
z Quantity Reds Green <
Quantity
3.
Unitary PED graph ② Income
elasticity of d
price Consumers are invariant to
YED : Income
a
change 'm price .
1- decrease
elasticity measures consume
demanded due
P inpricefromp ,→Pz causes sensitivity to
quantity
percentage change
'
price
%
in
an
equal change in revenue a .
vpz
, due to the extension of demand
Positive
% from Qz YED means the good
→
°
↳ Revenue is maximised is normal
good ↳ As income increases
} Quantify ataprice where PED -0 demand for the good incre
Red -_ Green
.
YED : % change in quantity demanded
%
change in income
Duringaboom :
During a recession :
Iphone Vpro ( normal good)
As incomes increase due magma , go.at?Inc0mesarefatliY Infe
Price to the boom D→A price Price
s
.
^Pi This increase in demand with
the ^P
PE higher price means ,
>
,,
peuenueforfhefinm increases upp; pe
D
D,
D
O
Qe Quantity ◦ °
QQE
a
Quantity
Price ↳A
③
elasticity of supply ↳ Asincomefallsdemand
shifts inwards from infer
PES : Measures the sensitivity of producers D-> A. This cause price D→D
to a
change in market price total/ and quantity revenu
, Government Intervention
③ Tax ⑥ Subsidy
price
RABB -
- Total tax revenue
price
s
's Ss
4-
<
=
T.axpaid.by consumers subsidy
Per
p, %
,
tax p, unit PE
Per
MY
Taxpaidby producers
pe
•
B p • ☐
unit -_
,
pz
sold
☐ his new higher consumer price p
◦
his new higher producer price
" °
QEQ
Quantity , Q
Quantity demand contracts from BTOA Quantity demandextenlsass
as demand decreases from Qe→Q ,
by the increase in quantity :Q
Price controls :
⑦ Price ceiling /Mox Price ⑧ Price floor /minim
Price Price
s Duetothemaxpricea market s
disequilibrium ofexcessdemand P' Pm
will result CQD Qs ) -
PE
Pma× %
Pi ↳ This cause
maythe buying /
D selling through illegal market D
°
Qua
°
QGQEQD Quantify QDQE Qs
Market failure :
④ Business behaviour :
Price
⑨ Public
goods :
<
S
PE
Price D. → Dioccursduetosome
VPI
s
consumers
trying to free ride
D
"
↳ AMF of underproduction D,
And under consumption results 0
V P
PE
,
a.
C
Qe
Quantify
D
