Elasticity, Demand and Supply

Elasticity is the percentage change in quantity demanded/supplied with respect to percentage change in price.

It measures the degree of responsiveness of change in quantity due to change in prices. Let's make it more simple

Elasticity = % Δ Q ÷ % Δ P

OR

Elasticity = Percentage Change in Quantity ÷ Percentage Change in Price

0 ≤ Elasticity ≤ 1

Where

 0 = Indicates Perfectly Inelastic

 1 = Indicates Perfectly Elastic

Elasticity Types

• Price Elasticity
• Income Elasticity
• Cross Elasticity
• Arc Elasticity

Elasticity of Demand

According to law of demand if other factors remains same, the increase in prices of product decreases its quantity demand.  This show the inverse relationship between prices and quantity demand.

It measures the proportional variations in quantity demanded due to proportional variations in price.

  Ed = Percentage Change in Qd ÷ Percentage Change in Price

In above diagram demand curve is negatively sloped and have negative elasticity of demand. At each point on demand curve we have different elasticity, like at mid-point elasticity is equal to unity, above this point it is greater than zero while at lower point less than zero.

Quickly Analyze the nature of good  

Elasticity Values	Nature of Good
Ed>1	Luxury Good
Ed=1	Normal Good
Ed<1	Basic Good
Ed=0	Neutral Good

 

Elasticity of Supply

 

Law of supply shows that if other factors remains same, the increase in prices of products increases the supply of that products. This reveals the positive association between prices and quantity supply.

The above diagram shows that supply curve positive slope and it has positive elasticity.

Elasticity of supply shows the percentage change in quantity supplied due to percentage change in price.

           
 Es = Percentage Change in Qs ÷ Percentage Change in Price

Elasticity of supply always positive because price and quantity moves in the same direction.

Microeconomics Books, PDF Free Download

There are some important microeconomics books. These books help you to broad your knowledge regarding this subject. You can easily download them in PDF version through the given link.

Principle of Microeconomics By Mankiw

  https://epdf.tips/queue/principles-of-microeconomics-6th-edition.html

Intermediate Microeconomics By Hal R. Varian

 

  https://www.pdfdrive.com/intermediate-microeconomics-a-modern-approach-8e-varian-d20591410.html

Microeconomic Analysis 3rd Edition By Hal R. Varian

 

       Microeconomic Analysis - Varian

Microeconomic Theory By John M. Gowdy

 

gowdy

Advanced Microeconomic Theory 3rd Edition By Jehle

 

jehle

Microeconomic Theory By Nicholson and Snyder

 

  nicholson_and_snyder_10th_ed

Microeconomics and Macroeconomics, Characteristics, Relationship, Similarities, Differences and Examples

The two main branches of economics are microeconomics and macroeconomics. Both kinds of economics cover small as well as aggregate parts of an economy.

Microeconomics is the study of micro part of an economy like Single Consumer, Producer, Factor Market, Optimum Factor of Production and Externalities.

  In microeconomics we determine how market forces determine price and quantity of goods and services.  

Macroeconomics is the study of aggregate components of an economy like Unemployment, Inflation, Business Cycles, Labor Market, Monetary and Fiscal Policy.

  Lets, explain it in easy words It is a branch of economics in which we examine how does variations in one component bring cyclical fluctuation in a economy.

Examples of Microeconomics and Macroeconomics

Look at the following examples

• In microeconomics consumer utilized given resources in such a way that he achieve maximum satisfaction from them. In this branch of economics we discuss how a consumer overcome the problem of scarcity.
• Opportunity cost concept discuss in microeconomics, according to this consumer make choices in two alternative decisions e.g a person is working in a factory and earn 25 dollars per month but if he perform the same service in other factory then he will get 30 dollars per month.
• In macroeconomics we study unemployment that occur due to  increase in cost of production (Increase in wage rates),  indirectly decrease the consumer demand for goods and services.
• Macroeconomics measures national income through different methods e.g Gross Domestic Product (GDP), Gross National Product (GNP), Net National Income (NNI), Personal Income and Disposable Personal Income. Gross Domestic Product is the most method use for measuring national income and aggregate demand commonly.

Difference Between Microeconomics and Macroeconomics

Let's differentiate microeconomics and macroeconomics through following table.

Microeconomics	Macroeconomics
Microeconomics concerned with  particular part of an economy e.g single consumer demand.	On the other hand macroeconomics concerned with large components of an economy e.g aggregate demand and supply of an economy.
In microeconomics market equilibrium taking place where quantity demand is equal to quantity supply. This branch of economics always reveals stable equilibrium position. At equilibrium point Qd = Qs	While in case of macroeconomics market equilibrium reveals the equality between aggregate demand and supply. But due to aggregate analysis there is sometimes market disequilibrium. At equilibrium point AD = AS
This branch of economics emphasis on economic theory.	Macroeconomics focus on mathematical as well as empirical data to check the validity of economic results.
Microeconomics explain economic theories under classical school of thought	On the other hand macroeconomics discuss under different school of thoughts e.g Classical, New Classical, Keynesian, Monetarist, Neo Classical and New Keynesian.
In microeconomics we only see the taxation implications on single consumer or producer.	While macroeconomics looks at the complete implications of taxation policy on the whole economy.

Microeconomics, Definition, Concept, Factors and Topics

It is a branch of economics that deals with small part of a economy.

Microeconomics is the study of separable action of producer and consumer. Commonly it reports the economic behavior of household, consumer, firm and entrepreneur. Basically, microeconomics follow scarcity concept, which means that individual managed insufficient resources in such a way that he obtains the maximum satisfaction from them.

This branch of economics deals how changes in household preference/choices might affect the prices of goods and services, similarly it also deals how industrialist preference might influence the prices of factors of production and both these terms considered decision making factors of microeconomics.

There are two types of factors which are discuss in this branch of economics, first endogenous factors that are determined within an economic model while second is exogenous factors that are determined outside of an economic model.

Objectives 

Objectives of microeconomics are different for both consumer and investor sides. In consumer behavior analysis a consumer or household wants to get maximum level of satisfaction from goods and services at lower prices.

While on the other side a firm wants to producer higher level of output at lower cost of production. So, both firm and consumer makes optimum strategy which increases personal interest of both.

Main Topics 

• Consumer Behavior
• Factors of Production
• Perfect Competition
• Monopoly
• Monopolistic Competition
• Price Discrimination
• Duopoly
• Oligopoly
• Cartel
• Game Theory
• Labor Market Analysis
• Optimum Factors of Production