05弹性及其应用解析.ppt

* This graph replicates the one in Figure 6. Note: The graph here is not quite drawn to scale. When the price rises from $3 to $4 a 29% increase, using the midpoint method , quantity rises from 100 to 120 or 67% . Because 67% 29%, price elasticity of supply is greater than one. When the price rises from $12 to $15 22% , quantity rises from 500 to 525 about 5% , so price elasticity of supply is less than one. The way I like to explain this is as follows: When output is very low, it is relatively easy for firms to increase output. They may have excess capacity, or they are not requiring full effort from their workers. Increasing output is not difficult, so it doesn’t take much of an increase in price to induce an increase in production. When output is very high, it is relatively expensive for firms to increase output further: there’s little or no excess capacity, they are already running their factories and machines at a high level of intensity. To increase output further, they might have to pay their workers overtime, and their machines experience more wear and tear and therefore require more repairs. So, at high levels of output, it takes a much larger price increase to make firms willing to increase output further. Eventually, firms bump up against their capacity constraints, and simply cannot increase output in response to further price increases. Of course, all of this applies to the short run. In the long run, firms can build more factories, and depending on the market structure new firms can enter the market. * * * * * The elasticity chapter in most principles textbooks is fairly technical, and is not always students’ favorite. This PowerPoint chapter contains several special features designed to engage and motivate students to learn this important material. First, we consider a scenario in which students face a business decision – whether to raise the price of a service they sell. This scenario is used to illustrate t