曼昆经济学原理英文版文案加习题答案5章ELASTICITY AND ITS APPLICATION.docx

1、曼昆经济学原理英文版文案加习题答案5章ELASTICITY AND ITS APPLICATIONWHATS NEW IN THE SEVENTH EDITION:There are no major changes to this chapter.LEARNING OBJECTIVES:By the end of this chapter, students should understand: the meaning of the elasticity of demand. what determines the elasticity of demand. the meaning of t

2、he elasticity of supply. what determines the elasticity of supply. the concept of elasticity in three very different markets (the market for wheat, the market for oil, and the market for illegal drugs).CONTEXT AND PURPOSE:Chapter 5 is the second chapter of a three-chapter sequence that deals with su

3、pply and demand and how markets work. Chapter 4 introduced supply and demand. Chapter 5 shows how much buyers and sellers respond to changes in market conditions. Chapter 6 will address the impact of government polices on competitive markets. The purpose of Chapter 5 is to add precision to the suppl

4、y-and-demand model. We introduce the concept of elasticity, which measures the responsiveness of buyers and sellers to changes in economic variables such as prices and income. The concept of elasticity allows us to make quantitative observations about the impact of changes in supply and demand on eq

5、uilibrium prices and quantities.KEY POINTS: The price elasticity of demand measures how much the quantity demanded responds to changes in the price. Demand tends to be more elastic if close substitutes are available, if the good is a luxury rather than a necessity, if the market is narrowly defined,

6、 or if buyers have substantial time to react to a price change. The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. If quantity demanded moves proportionately less than the price, then the elasticity is less than one,

7、and demand is said to be inelastic. If quantity demanded moves proportionately more than the price, then the elasticity is greater than one, and demand is said to be elastic. Total revenue, the total amount paid for a good, equals the price of the good times the quantity sold. For inelastic demand c

8、urves, total revenue moves in the same direction as the price. For elastic demand curves, total revenue moves in the opposite direction as the price. The income elasticity of demand measures how much the quantity demanded responds to changes in consumers income. The cross-price elasticity of demand

9、measures how much the quantity demanded of one good responds to the price of another good. The price elasticity of supply measures how much the quantity supplied responds to changes in the price. This elasticity often depends on the time horizon under consideration. In most markets, supply is more e

10、lastic in the long run than in the short run. The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. If quantity supplied moves proportionately less than the price, then the elasticity is less than one, and supply is said

11、 to be inelastic. If quantity supplied moves proportionately more than the price, then the elasticity is greater than one, and supply is said to be elastic. The tools of supply and demand can be applied in many different kinds of markets. This chapter uses them to analyze the market for wheat, the m

12、arket for oil, and the market for illegal drugs.CHAPTER OUTLINE:I. The Elasticity of DemandA. Definition of elasticity: a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants.B. The Price Elasticity of Demand and Its Determinants1. Definition of price el

13、asticity of demand: a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price.2. Determinants of the Price Elasticity of Demanda. Availability of Close Substit

14、utes: the more substitutes a good has, the more elastic its demand.b. Necessities versus Luxuries: necessities are more price inelastic.c. Definition of the market: narrowly defined markets (ice cream) have more elastic demand than broadly defined markets (food).d. Time Horizon: goods tend to have m

15、ore elastic demand over longer time horizons.C. Computing the Price Elasticity of Demand1. FormulaWork through a few elasticity calculations, starting with the example in the book. For principles of economics courses where there is no mathematical prerequisite, this may be difficult for some student

16、s. Working through a few simple examples will help to alleviate some of the students anxiety. Show every step of the algebra involved.2. Example: the price of ice cream rises by 10% and quantity demanded falls by 20%.Price elasticity of demand = (20%)/(10%) = 23. Because there is an inverse relation

17、ship between price and quantity demanded (the price of ice cream rose by 10% and the quantity demanded fell by 20%), the price elasticity of demand is sometimes reported as a negative number. We will ignore the minus sign and concentrate on the absolute value of the elasticity.Students hate this! Ex

18、plain that it really makes things easier and makes more sense because larger elasticities (in absolute value) imply greater sensitivity and responsiveness. D. The Midpoint Method: A Better Way to Calculate Percentage Changes and Elasticities1. Because we use percentage changes in calculating the pri

19、ce elasticity of demand, the elasticity calculated by going from one point to another on a demand curve will be different from an elasticity calculated by going from the second point to the first. This difference arises because the percentage changes are calculated using a different base.a. A way ar

20、ound this problem is to use the midpoint method.b. Using the midpoint method involves calculating the percentage change in either price or quantity demanded by dividing the change in the variable by the midpoint between the initial and final levels rather than by the initial level itself.c. Example:

21、 the price rises from $4 to $6 and quantity demanded falls from 120 to 80.% change in price = (6 4)/5 100 = 40% change in quantity demanded = (120 80)/100 x 100 = 40%price elasticity of demand = 40/40 = 1E. The Variety of Demand CurvesFigure 1To clearly show the differences between relatively elasti

22、c and relatively inelastic demand curves, draw a graph on the board showing a relatively flat demand curve and one showing a relatively steep demand curve. Show that any given change in price will result in a larger change in quantity demanded if the demand curve is relatively flat. Use the same met

23、hod when discussing the shape of the supply curve later in the chapter.1. Classification of Elasticitya. When the price elasticity of demand is greater than one, demand is defined to be elastic.b. When the price elasticity of demand is less than one, the demand is defined to be inelastic.c. When the

24、 price elasticity of demand is equal to one, the demand is said to have unit elasticity.Activity 1How the Ball BouncesType: In-class demonstrationTopics: Elastic, inelasticMaterials needed: One rubber ball and one “dead” ball. The “dead” ball is made of shock-absorbing material and doesnt bounce. Mu

25、seum stores and magic shops carry them. Time: 1 minute Class limitations: Works in any size classPurposeThis quick, but memorable, demonstration can be used to introduce the concepts of elastic and inelastic.InstructionsBring two students to the front of the class. Give each of them a ball and ask t

26、hem to bounce it off the floor and catch it. The student with the rubber ball can do this easily. The student with the “dead” ball will not be able to bounce it high enough to catch, no matter how hard he or she throws it. Explain that one ball is elastic; it is responsive to change. The other ball

27、is inelastic; it responds very little to change. These physical properties of elastic and inelastic are analogous to the economic concepts of elastic and inelastic.2. In general, the flatter the demand curve that passes through a given point, the more elastic the demand.3. Extreme Casesa. When the p

28、rice elasticity of demand is equal to zero, the demand is perfectly inelastic and is a vertical line.b. When the price elasticity of demand is infinite, the demand is perfectly elastic and is a horizontal line.Make sure that you provide several examples of goods with these types of demand curves. Yo

29、u may want to point out that students will see the perfectly elastic demand curve again when competitive firms are discussed.4. FYI: A Few Elasticities from the Real World F. Total Revenue and the Price Elasticity of DemandFigure 21. Definition of total revenue: the amount paid by buyers and receive

30、d by sellers of a good, computed as the price of the good times the quantity sold.Another term for price times quantity is “total expenditure.” This term is sometimes used in questions found in the study guide and test bank. It is also important to point this out when discussing the market for illeg

31、al drugs at the end of the chapter.Students find the relationship between changes in total revenue and elasticity difficult to understand. It may take several thorough discussions of this material before students will be able to master it.2. If demand is inelastic, the percentage change in price wil

32、l be greater than the percentage change in quantity demanded.Figure 3a. If price rises, quantity demanded falls, and total revenue will rise (because the increase in price will be larger than the decrease in quantity demanded). b. If price falls, quantity demanded rises, and total revenue will fall (because the fall in price will be larger than the increase in quantity demanded).3. If demand is elastic, the percentage change in quantity demanded will be greater than the percentage change i