Price Elasticity of Supply

Price Elasticity of Supply This is the third article in this series on the economic concept of elasticity. The first explains the basic concept of elasticity and illustrates it using price elasticity of demand as an example. The second article in the series considers Income Elasticity of Demand.  Ã‚   A brief review  of the concept of elasticity and of price elasticity of demand appears in the section immediately following. In the section following that income elasticity of demand is also reviewed.  In the final section, price elasticity of supply is explained and its formula given in the context of the discussion and reviews in the previous sections. A Brief Review of Elasticity in Economics Consider the demand for a certain good- aspirin, for example. What happens to the demand for one manufacturers aspirin product when that manufacturer- which well call manufacturer X- raises the price? Keeping that question in mind, consider a different situation: the demand for the worlds most expensive new automobile, the  Koenigsegg CCXR Trevita. Its reported retail price is $4.8 million. What do you think might happen if the manufacturer raised the price to $5.2M or lowered it to $4.4M?   Now, return to the question of the demand for manufacturer Xs aspirin product following an increase in the retail price. If you guessed that the demand for Xs aspirin  might decline substantially, youd be right. It makes sense, because, first, every manufacturers aspirin product is essentially the same as anothers- theres no health advantage whatsoever in selecting one manufacturers product over another. Second, the product is widely available from a number of other manufacturers- the consumer always has a number available choices. So, when a consumer selects an aspirin product, one of the few things that distinguish manufacturer Xs product from others is that it costs a little more. So why would the consumer choose X? Well, some might continue to buy aspirin X out of habit or brand loyalty, but many very probably would not. Now, lets return to the Koenigsegg CCXR, which currently costs $4.8M, and think about what might happen if the price went up or down a few hundred thousand. If you thought it might not change the demand for the car by that much, youre right again. Why? Well, first of all, anyone in the market for a multi-million dollar automobile is not a frugal shopper. Someone who has money enough to consider the purchase is unlikely to be concerned about price. Theyre concerned primarily about the car, which is unique. So the second reason why the demand might not change much with price is that, really, if you want that particular driving experience, theres no alternative. How would you state these two situations in more formal economic terms? Aspirin has a high price elasticity of demand, meaning that small changes in price have greater demand consequences. The Koenigsegg CCXR Trevita has a low elasticity of demand, meaning that changing the price doesnt greatly change buyer demand.  Another way of stating the same thing a little more generally is that when the demand for the product has a percentage change thats less than the percentage change in the products price, the demand is said to be inelastic. When the percentage increase or decrease in demand is greater than the percentage increase in price, the demand  is said to be elastic.   The formula for price elasticity of demand, which is explained in a little more detail in the first article in this series, is: Price Elasticity of Demand (PEoD) (% Change in Quantity Demanded/ (% Change in Price) A Review of Income Elasticity of Demand The second article in this series, Income Elasticity of Demand, considers the effect on demand of a different variable, this time consumer income. What happens to consumer demand when consumer income drops? The article explains that what happens to consumer demand for a product when consumer income drops depends upon the product. If the product is a necessity- water, for instance- when consumer income drops they will continue to use water- perhaps a little more carefully- but theyll probably cut back on other purchases. To generalize this idea slightly, consumer demand for essential products will be relatively inelastic  with respect to changes in consumer income, but elastic  for products that are not essential. The formula for this is: Income Elasticity of Demand (% Change in Quantity Demanded)/(% Change in Income) Price Elasticity of Supply The price elasticity of supply (PEoS) is used to see how sensitive the supply of a good is to a price change. The higher the price elasticity, the more sensitive producers and sellers are to price changes. A very high price elasticity suggests that when the price of a good goes up, sellers will supply a great deal less of the good and when the price of that good goes down, sellers will supply a great deal more. A very low price elasticity implies just the opposite, that changes in price have little influence on supply. The formula for price elasticity of supply is: PEoS (% Change in Quantity Supplied)/(% Change in Price) As with the elasticity of other variables If PEoS 1 then Supply is Price Elastic (Supply is sensitive to price changes)If PEoS 1 then Supply is Unit ElasticIf PEoS 1 then Supply is Price Inelastic (Supply is not sensitive to price changes) Incidentally, we always ignore the negative sign when analyzing  price  elasticity, so PEoS is always positive.

The Bestest Educational Blogs 2014

The Bestest Educational Blogs 2014 Holiday season has almost started and 2014 is coming to the end. Seems like its a perfect time to look back, make an overview of the years most popular trends and projects, give some praise and appreciation to those who were successful, useful, supportive and made difference in 2014. Thats why we made a list of blogs on education and college life, which in our opinion provide valuable tips, cover important issues, offer fresh ideas and have their own unique voice. For your convenience, blogs are divided into sections according to the theme, purpose and authorship. With no further delay, meet our top educational blogs 2014! Teachers Blogs 2014 Great teachers are usually education enthusiasts. They are following latest trends and are willing to share their experince, knowledge and skills with fellow teachers and students. Following authoritative educators blogs you will not only get valuable study tips, but will understand your professors and their requirements better. The Nerdy Teacher (thenerdyteacher.com) Insights into education, modern technologies and other nerdy things. Hunting English (huntingenglish.com) Practical learning tips, study strategies and excellent infographics MathyCathys Blog (mathycathy.com/blog) Progressive views on education, ideas to understand math better with the help of modern technologies. DY/Dan (blog.mrmeyer.com) Mind games, math theories, conference overviews and ways to make math more attractive for students Joanne Jacobs Blog (joannejacobs.com) Controversial issues, educational news and extracurricular activities for educators and students Students and Graduates Blogs Students usually have not so much time to blog. However, those who do find time, can share a lot of interesting about study hacks and college life with student eyes. Graduates have even more to tell about their experience of college survival. That Girl Magazine (thatgirlmag.com) Brown University student, linguistics major with a special world outlook A Law Students Journey (threeyearsofdeath.blogspot.com) Former law student sharing tips on law school survival Aspiring Docs Diaries (aspiringdocsdiaries.org) Collective blog by medical students for medical students The English Student (theenglishstudent.com/blog) Master in Adult Education Jenny shares learning materials, language learning tips and motivation College Life Blogs Want to know more about college life even before it actually begins? Want to be aware of latest trends, news and every aspect of college life? Fortunately, there are blogs versatile and dynamic enough to cover chaotic college life in its fullest! Her Campus (hercampus.com) A stylish girly blog about everything a college student may be interested in Seventeen (seventeen.com) College life tips mixed with beauty and fashion advice, celebrity news and quizes College Fashion (collegefashion.net) Latest fashion trends and style tips for college students DormDelicious (dormdelicious.com) Room designs, decoration tips and diy ideas for any campus living student College Candy (collegecandy.com) College is much more than studies! Follow fashion, entertain, take care of your body and soul Students and Finances Blogs The financial side of college life bothers the majority of students. How to live on budget, control your finances, and spend money wisely? The following blogs aim to answer financial questions and make your college life easier. Broke Millenial (brokemillennial.com) Tips on money saving, graduating college debt free and increasing financial literacy The Broke and Beautiful Life (thebrokeandbeautifullife.com) Practical advice on conscious spending and getting extra income Teens Got Cents (teensgotcents.com) Blog teaching teens to be financially smart - whatever it may meen Poorer Than You (poorerthanyou.com) Financial advice on savings, budgeting, earning and spending money, evaluating job offers and much more The Diary of a Poor Girl (thediaryofapoorgirl.blogspot.co.uk) Personal blog of witty and creative brunette sharing her life experience, financial and relationship tips Students and Cooking Blogs Cooking while in college can be a real challenge. Lack of skills, time and money make students opt for junk food three times a day. However, the following blogs show that cooking can be easy, cheap and surprisingly fun! Full-Thyme Student (fullthymestudent.com) Cooking in college can be easy, quick and save your budget if you know good recipes and tips to follow Collegiate Cook (collegiatecook.com) Useful and practical campus guides for fast and delicious cooking Poor Girl Eats Well (poorgirleatswell.com) Tips on how to eat healthy, delicious food and save your money at the same time Budget Bytes (budgetbytes.com) Great and creative recipes to keep your stomach full as well as your wallet Career and Internships Blogs College years is the time when you create the basis for future career. So, it is reasonable to start making your way into career world, learning about job application process and career opportunities, building network with potential employers, applying for internships and getting valuable experience. Quintessential Careers (quintcareers.com) Quintessential blog for job hunters, providing reÐ ¸Ã'‰sume and interview tips, career resources and employment tips Chegg Blog (blog.chegg.com) The versatile article topics include internship and job opportunities, as well as study tips, college life hack and much more Lindsey Pollak (lindseypollak.com/blog) Expert career advice for millenials to find job, stay productive and build a successful career College Aftermath (collegeaftermath.com) Is there life after graduation? What is it like? Find the answer to all post-graduation questions bothering you Intern Queen Blog (internqueen.com/blog) Fresh and interesting internship opportunities along with useful tips on smooth graduation and successful employment Have anyhing to add? Your feedback and comments are always welcome!