Economy

Principles of Microeconomics

(ECO2103)

Diploma in Business Administration Mehdi Tasaloti mehdi.tasaloti@newinti.edu.my

Faculty of Business, Communication & Law (FOBCAL) INTI International University

August 2014 Session

Faculty of Business, Communications and Law INTI International University

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Class syllabus for Long semester

Week Topic

1-3 4-6 7&8

Economics Concepts, Issues & tools Price Theory ( Demand & Supply) / Individual assignment/ Test 1

Applications of Price Theory ( Elasticity)/ Group assignment 9 Theory of Consumer behavior 10 Market Failure & Externalities 11&12 Theory of Firm: Production and Costs / Test 2 13 & 14 Market Structures

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Topic 3:

Elasticity

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What is an Elasticity? • Measurement of the percentage change in one variable that results from a 1% change in another variable. • Can come up with many elasticities.

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Elasticity – the concept

• The responsiveness of one variable to changes in another • When price rises, what happens to demand? Demand falls BUT how much does demand fall? • If price rises by 10% - what happens to demand? We know demand will fall By more than 10%? By less than 10%?

• Elasticity measures the extent to which demand will change

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4 basic types of elasticities

Demand

Price Demand elasticity Income Supply of demand elasticity Cross price of demand elasticity Price of demand elasticity of supply

Demand

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The Elasticity of Demand

• Elasticity

– Measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants

• Price elasticity of...