1.1. Introduction to Elasticity

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En provenance du cours de University of Illinois at Urbana-Champaign

Microeconomics Principles

609 notes

University of Illinois at Urbana-Champaign

Microeconomics Principles

609 notes

This course offers an introduction to the functions of individual decision-makers—both consumers and producers—within the larger economic system. Emphasis is on the nature and functions of product markets, the theory of the firm under varying conditions of competition and monopoly, and the role of government in promoting efficiency in the economy. Most people make the incorrect assumption that economics is ONLY the study of money. My primary goal in this course is to shatter this belief. During this course, we will be addressing the above questions as well as many more relating to: -the environment -love and marriage -crime -labor markets -education -politics -sports -business My main goal is to show you the way economists think and how to use this analytical system to answer questions related not only to these and other important human issues, but to anything you end up doing with your life after this class. After all, as you will quickly find out, I believe that everything is economics!

À partir de la leçon

Elasticities

Welcome to the fourth week! This module we will cover one of my favorite economics concepts: elasticity. It is one of my favorites because of how useful it is to analyze policy implications, as well as its usefulness for business managers. This will be obvious to you when you read one of the discussion topics for this module: Should we legalize marijuana?

1.1. Introduction to Elasticity4:43

Rencontrer les enseignants

Dr. José J. Vázquez-Cognet
Clinical Professor
Department of Economics

Welcome to week four of Microeconomics. My name is Jose Vazquez and we are here

again in a different location at Champaign-Urbana, which is where the

University of Illinois is located. And we are at the Black Dog Smoke House

and Bar. It's one of the most popular places in

town. It's hard to get a table here if you come

any time of the week after 4 o'clock. If you to come at lunch it's hard to get a

table here period. This place is crowded from the moment they

open the doors to the moment they close. And we wanted to come here, because this

part of the week, we are going to try to transition from, from the general economy

into more of the business side of the of economics.

And we'll really go full fletch to the business side next week, but this week

it's a good place to start here, because we're going to start talking about prices

as we discuss the issue of elasticity. And elasticity is one of the most

important issues in economics and one of the most interesting ones and so, we' ll

do that this week. We have some interesting applications.

We talk about taxes towards the end of the week, after we cover the concepts.

We also talk a little bit go back to the example of the market for illegal drugs,

particularly marijuana, and see what is the effect on crime.

So we have some interesting applications of elasticity.

Elasticity, actually, turns out to be one of the most interesting topics of

economics. Now we're here starting this week,

because, as we said, we're going to talk about prices, and in particularly, the

effect of a change in price has both on the revenue side and on the expenditure

side. For the revenue side, if you have a

business, then you care about what is the effect of a change in price.

For instance, one question that you can have to a person that owns this business

is you sell a barbecue sandwich are really popular here for $7.95.

Someone eating the sandwich and really thinking this is the best sandwich I ever

had, one question they could have is like how come yo don't increase the prices of

your sandwiches? You can make a lot more money if you do.

So, before I give you the answer, and I won't give you the answer completely until

the end of that week, so you'll have time to think about it.

Let's hear what the owner of this establishment has to say about that.

[music]. Black Dog restaurant, we do traditional

barbecue sort of like a beef brisket pulled pork, and then, we like to have a

little fun and do some specials, like our Cuban sandwich where we take American

barbecue, the pulled pork, and add it to the Cuban sandwich to try to do something

a little different. [music] Most of our sandwiches are priced

around, are priced at 7.95 and we figure a, try to figure a food cost of 35%.

So we'd start there with what it costs and essentially multiply by three to get our

price and you have to include everything that goes in that sandwich.

So the barbecue sauce, the coleslaw the protein, the bun, and then, we also do the

same thing for the side order, but we're not necessarily greedy.

I mean we're not out to try to make the most money.

We're in it for the long haul. It's a business we want to do.

We, we're not trying to make people mad. We'd like to see a lot of people coming

through the door and I think that's one of the benefits of our business in what we're

in is that we appeal to a broad range of people and that's what keeps us busy as we

are. We already have a long line.

We don't need another inhibition for people.

We don't need it another way for people not to want to come to us.

So we hear like a lot of things about what they're already established and has to say

and we'll, we actually hear most about, more about him in the weeks to come.

But in particular, into some prices, you heard that increase in the price for him

is not necessarily such a done deal, right?

It's not such an easy question. There's some reasons that he gave you as

to why he wouldn't increase the, the price of the sandwiches, and one of them, is

because it would probably reduce the number of people walking through the door.

Right? So the price elasticity of demand, the

topic we're going to talk about this week is that rate that he keeps his mind about

the need, the price of the sandwich versus the people coming through the door.

This is one of the most interesting topics that we're going to do throughout the

course. We have some interesting applications

toward the end. Elasticity, again, influence both sides of

the of the equation, the revenue, and expenditures.

But first, we need to actually do the nitty gritty and learn really what

elasticity is. And we're going to, to do those things

first and then start applying those concepts at the end of the week.

[music] Produced by OCE Atlas Digital Media at the University of Illinois

Urbana-Champaign.

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