曼昆经济学Elasticity and Its ApplicationWord文档格式.docx

曼昆经济学Elasticity and Its ApplicationWord文档格式.docx

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ELASTICITYAND

ITSAPPLICATION

Learnthemeaningoftheelasticityofsupply

ImagineyourselfasaKansaswheatfarmer.Becauseyouearnallyourincomefromsellingwheat,youdevotemuchefforttomakingyourlandasproductiveasitcanbe.Youmonitorweatherandsoilconditions,checkyourfieldsforpestsanddisease,andstudythelatestadvancesinfarmtechnology.Youknowthatthemorewheatyougrow,themoreyouwillhavetosellaftertheharvest,andthehigherwillbeyourincomeandyourstandardofliving.

OnedayKansasStateUniversityannouncesamajordiscovery.Researchersinitsagronomydepartmenthavedevisedanewhybridofwheatthatraisestheamountfarmerscanproducefromeachacreoflandby20percent.Howshouldyoureacttothisnews?

Shouldyouusethenewhybrid?

Doesthisdiscoverymakeyoubetterofforworseoffthanyouwerebefore?

Inthischapterwewillseethatthesequestionscanhavesurprisinganswers.Thesurprisewillcomefrom

elasticityofsupply

Applytheconceptofelasticityinthree

verydifferentmarkets

93

applyingthemostbasictoolsofeconomics—supplyanddemand—tothemarketforwheat.

Thepreviouschapterintroducedsupplyanddemand.Inanycompetitivemarket,suchasthemarketforwheat,theupward-slopingsupplycurverepresentsthebehaviorofsellers,andthedownward-slopingdemandcurverepresentsthebehaviorofbuyers.Thepriceofthegoodadjuststobringthequantitysuppliedandquantitydemandedofthegoodintobalance.Toapplythisbasicanalysistounderstandtheimpactoftheagronomists’discovery,wemustfirstdeveloponemoretool:

theconceptofelasticity.Elasticity,ameasureofhowmuchbuyersandsellersrespondtochangesinmarketconditions,allowsustoanalyzesupplyanddemandwithgreaterprecision.

THEELASTICITYOFDEMAND

elasticity

ameasureoftheresponsivenessofquantitydemandedorquantitysuppliedtooneofitsdeterminants

priceelasticityofdemandameasureofhowmuchthequantitydemandedofagoodrespondstoachangeinthepriceofthatgood,computedasthepercentagechange

inquantitydemandeddividedbythe

percentagechangeinprice

WhenwediscussedthedeterminantsofdemandinChapter4,wenotedthatbuy-ersusuallydemandmoreofagoodwhenitspriceislower,whentheirincomesarehigher,whenthepricesofsubstitutesforthegoodarehigher,orwhenthepricesofcomplementsofthegoodarelower.Ourdiscussionofdemandwasqualitative,notquantitative.Thatis,wediscussedthedirectioninwhichthequantityde-mandedmoves,butnotthesizeofthechange.Tomeasurehowmuchdemandre-spondstochangesinitsdeterminants,economistsusetheconceptofelasticity.

THEPRICEELASTICITYOFDEMANDANDITSDETERMINANTS

Thelawofdemandstatesthatafallinthepriceofagoodraisesthequantityde-manded.Thepriceelasticityofdemandmeasureshowmuchthequantityde-mandedrespondstoachangeinprice.Demandforagoodissaidtobeelasticifthequantitydemandedrespondssubstantiallytochangesintheprice.Demandissaidtobeinelasticifthequantitydemandedrespondsonlyslightlytochangesintheprice.

Whatdetermineswhetherthedemandforagoodiselasticorinelastic?

Be-causethedemandforanygooddependsonconsumerpreferences,thepriceelas-ticityofdemanddependsonthemanyeconomic,social,andpsychologicalforcesthatshapeindividualdesires.Basedonexperience,however,wecanstatesomegeneralrulesaboutwhatdeterminesthepriceelasticityofdemand.

NecessitiesversusLuxuriesNecessitiestendtohaveinelasticde-mands,whereasluxurieshaveelasticdemands.Whenthepriceofavisittothedoctorrises,peoplewillnotdramaticallyalterthenumberoftimestheygotothedoctor,althoughtheymightgosomewhatlessoften.Bycontrast,whenthepriceofsailboatsrises,thequantityofsailboatsdemandedfallssubstantially.Thereasonisthatmostpeopleviewdoctorvisitsasanecessityandsailboatsasaluxury.Ofcourse,whetheragoodisanecessityoraluxurydependsnotontheintrinsicpropertiesofthegoodbutonthepreferencesofthebuyer.Foranavidsailorwith

CHAPTER5ELASTICITYANDITSAPPLICATION95

littleconcernoverhishealth,sailboatsmightbeanecessitywithinelasticdemandanddoctorvisitsaluxurywithelasticdemand.

AvailabilityofCloseSubstitutesGoodswithclosesubstitutestendtohavemoreelasticdemandbecauseitiseasierforconsumerstoswitchfromthatgoodtoothers.Forexample,butterandmargarineareeasilysubstitutable.Asmallincreaseinthepriceofbutter,assumingthepriceofmargarineisheldfixed,causesthequantityofbuttersoldtofallbyalargeamount.Bycontrast,becauseeggsareafoodwithoutaclosesubstitute,thedemandforeggsisprobablylesselasticthanthedemandforbutter.

DefinitionoftheMarketTheelasticityofdemandinanymarketde-pendsonhowwedrawtheboundariesofthemarket.Narrowlydefinedmarketstendtohavemoreelasticdemandthanbroadlydefinedmarkets,becauseitiseasiertofindclosesubstitutesfornarrowlydefinedgoods.Forexample,food,abroadcategory,hasafairlyinelasticdemandbecausetherearenogoodsubstitutesforfood.Icecream,amorenarrowcategory,hasamoreelasticdemandbecauseitiseasytosubstituteotherdessertsforicecream.Vanillaicecream,averynarrowcategory,hasaveryelasticdemandbecauseotherflavorsoficecreamarealmostperfectsubstitutesforvanilla.

TimeHorizonGoodstendtohavemoreelasticdemandoverlongertimehorizons.Whenthepriceofgasolinerises,thequantityofgasolinedemandedfallsonlyslightlyinthefirstfewmonths.Overtime,however,peoplebuymorefuel-efficientcars,switchtopublictransportation,andmoveclosertowheretheywork.Withinseveralyears,thequantityofgasolinedemandedfallssubstantially.

COMPUTINGTHEPRICEELASTICITYOFDEMAND

Nowthatwehavediscussedthepriceelasticityofdemandingeneralterms,let’sbemorepreciseabouthowitismeasured.Economistscomputethepriceelasticityofdemandasthepercentagechangeinthequantitydemandeddividedbytheper-centagechangeintheprice.Thatis,

Priceelasticityofdemand

Percentagechangeinquantitydemanded

Percentagechangeinprice.

Forexample,supposethata10-percentincreaseinthepriceofanice-creamconecausestheamountoficecreamyoubuytofallby20percent.Wecalculateyourelasticityofdemandas

20percent

Priceelasticityofdemand10percent2.

Inthisexample,theelasticityis2,reflectingthatthechangeinthequantityde-mandedisproportionatelytwiceaslargeasthechangeintheprice.

Becausethequantitydemandedofagoodisnegativelyrelatedtoitsprice,thepercentagechangeinquantitywillalwayshavetheoppositesignasthe

percentagechangeinprice.Inthisexample,thepercentagechangeinpriceisapos-itive10percent（reflectinganincrease）,andthepercentagechangeinquantityde-mandedisanegative20percent（reflectingadecrease）.Forthisreason,priceelasticitiesofdemandaresometimesreportedasnegativenumbers.Inthisbookwefollowthecommonpracticeofdroppingtheminussignandreportingallpriceelasticitiesaspositivenumbers.（Mathematicianscallthistheabsolutevalue.）Withthisconvention,alargerpriceelasticityimpliesagreaterresponsivenessofquan-titydemandedtoprice.

THEMIDPOINTMETHOD:

ABETTERWAYTOCALCULATEPERCENTAGECHANGESANDELASTICITIES

Ifyoutrycalculatingthepriceelasticityofdemandbetweentwopointsonade-mandcurve,youwillquicklynoticeanannoyingproblem:

TheelasticityfrompointAtopointBseemsdifferentfromtheelasticityfrompointBtopointA.Forexample,considerthesenumbers:

PointA:

Price$4

Quantity120

PointB:

Price$6

Quantity80

GoingfrompointAtopointB,thepricerisesby50percent,andthequantityfallsby33percent,indicatingthatthepriceelasticityofdemandis33/50,or0.66.Bycontrast,goingfrompointBtopointA,thepricefallsby33percent,andthequantityrisesby50percent,indicatingthatthepriceelasticityofdemandis50/33,or1.5.

Onewaytoavoidthisproblemistousethemidpointmethodforcalculatingelasticities.Ratherthancomputingapercentagechangeusingthestandardway（bydividingthechangebytheinitiallevel）,themidpointmethodcomputesapercentagechangebydividingthechangebythemidpointoftheinitialandfinallevels.Forinstance,$5isthemidpointof$4and$6.Therefore,accordingtothemidpointmethod,achangefrom$4to$6isconsidereda40percentrise,because（64）/510040.Similarly,achangefrom$6to$4isconsidereda40per-centfall.

Becausethemidpointmethodgivesthesameanswerregardlessofthedirec-tionofchange,itisoftenusedwhencalculatingthepriceelasticityofdemandbe-tweentwopoints.Inourexample,themidpointbetweenpointAandpointBis:

Midpoint:

Price$5Quantity100

Accordingtothemidpointmethod,whengoingfrompointAtopointB,thepricerisesby40percent,andthequantityfallsby40percent.Similarly,whengoingfrompointBtopointA,thepricefallsby40percent,andthequantityrisesby

40percent.Inbothdirections,thepriceelasticityofdemandequals1.

Wecanexpressthemidpointmethodwith