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Pertemuan 4
Pertemuan 4
Economics
PRINCIPLES OF
N. Gregory Mankiw
P The slope
200% of a linear
$30 E = = 5.0
40% demand
67% curve is
20 E = = 1.0
67% constant,
but its
40%
10 E = = 0.2 elasticity
200%
is not.
$0 Q
0 20 40 60
Revenue = P x Q
Revenue = P x Q
If demand is inelastic, then
price elast. of demand < 1
% change in Q < % change in P
The fall in revenue from lower Q is smaller
than the increase in revenue from higher P,
so revenue rises.
In our example, suppose that Q only falls to 10
(instead of 8) when you raise your price to $250.
ELASTICITY AND ITS APPLICATION 23
Price Elasticity and Total Revenue
Now, demand is
increased
Demand for
inelastic:
revenue due
your websites
elasticity = 0.82 P to higher P lost
If P = $200, revenue
due to
Q = 12 and
$250 lower Q
revenue = $2400.
$200
If P = $250,
Q = 10 and D
revenue = $2500.
When D is inelastic,
Q
a price increase 10 12
causes revenue to rise.
ELASTICITY AND ITS APPLICATION 24
Price Elasticity of Supply
Price elasticity Percentage change in Qs
=
of supply Percentage change in P
P Supply
Supply often
often
S
elasticity becomes
becomes
$15 <1 less
less elastic
elastic
as
as Q
Q rises,
rises,
12
due
due to
to
elasticity capacity
capacity
>1 limits.
limits.
4
$3
Q
100 200
500 525