I know that you probably won't see this comment but I'd like to sincerely thank you for making me understand this concept after watching almost 3 videos now! Definitely will subscribe and like this video!
My textbook mentions steeper demand curves tend to be inelastic (with greater slopes) whereas flatter curves elastic. But along the same curve you characterise both elastic and inelastic regions as well? I’m a bit confused by this
Yeah it's a confusing one, I will do a video on it when I have time. When we compare two curves, we can talk about whether one demand curve is more or less elastic relative to another. So if you put two curves side by side, for the same price change, the steeper curve will lead to a smaller change in demand, so will be less reactive to the price change, i.e. be more inelastic (relative to the other curve). We can call this 'relative elasticity'. At the limit of this, our horizontally straight demand curves are perfectly elastic, whilst our vertically straight demand curves are perfectly inelastic. If we want to talk about elasticity at a point, or within a region, along a single demand curve, we use our elasticity formula e = dq/dp*P/Q. It is this value that is being addressed in this video, and this value will change along a single curve. I don't think I mention it in the video but since dq/dp is the inverse of the slope, and the slope of a straight line is constant, so dq/dp is also constant. That's the first part of our elasticity formula 'e'. As we move along the curve however the ratio of P/Q changes, from large (where we have high P, low Q) to small (low P, high Q), and this really drives the change in 'e' as we move along the curve. The distinction between relative elasticity (what your book discuses in referring to the slope) and elasticity along (or on) a single curve is typically not well addressed in the books and is often a source of confusion. I found this as a resource that is good: pressbooks.bccampus.ca/uvicecon103/chapter/4-3-calculating-elasticity/ In particular see the summary: "Whereas hard labels such as elastic, unit elastic, and inelastic can be used to describe specific sections of supply and demand curves (based on a calculated value), when comparing two curves everything is relative." - If you can't get your head around it, ask your teacher, it's a good question! Hope that helps, good luck with your study :)
@@econhelp_official Thank you! It does feel a lot clearer now indeed! One small question- if you have two demand curves that go through the same point; will their elasticity in that point differ only because of the different values for dq/dp (while P/Q in that point is the same for both)? So if one of them is relatively steep (thus relatively inelastic), its elasticity in that point will be greater because of the greater value for dq/dp? I'm kind of synthesizing relative elasticity and zone elasticity by imagining, for example, a market equilibrium in the elastic region of the demand curve; a positive supply shock that shifts the supply curve to the right causes P* and Q* to move to the more inelastic regions of the demand curve. And so the steeper the demand curve, the further that same supply shock would shift market equilibrium to the inelastic region on the demand curve?
@@maxfiction "if you have two demand curves that go through the same point; will their elasticity in that point differ only because of the different values for dq/dp (while P/Q in that point is the same for both)?" Yes exactly. dq/dp is the inverse of the slope, so say one slope = -2 and the other is -1. The first should come out more inelastic than the other at any point, or over any region, because it's steeper. The dq/dp is -1/2 and -1 respectively. Say P = 10 and Q = 10 so that P/Q = 1 then the elasticities are -1/2 and -1 respectively. The absolute value of the latter is larger, hence our intuitions are confirmed - it's more elastic. "a positive supply shock that shifts the supply curve to the right causes P* and Q* to move to the more inelastic regions of the demand curve." Yes, though we could just be moving in the elastic region, so we might want to express this as, as long as there is some slope to the demand curve, you will go from a more elastic to less elastic (maybe inelastic) region as the price decreases (as a result of a shift in supply, say). "And so the steeper the demand curve, the further that same supply shock would shift market equilibrium to the inelastic region on the demand curve?" Maybe, I'm not sure since there are a few moving parts here, I have to think more. The issue is that if we superimpose the same supply shift over two different curves, the price change will be different. So if we hold the change in supply fixed, we will get two different changes in price and two different quantity changes, which (for me at least) is a confusing situation if we want to then compare elasticities, or changes in elasticities. On-top of that what matters when thinking about regions of the curve is where the equilibria lie on each curve. So I'm actually not sure. I think this is why, usually, when we explain elasticities we hold the price change (or price) fixed rather than talking about holding fixed a supply shift, or really any equilibrium result. So like you did in the first part of the comment when you were thinking about the elasticity at some fixed price. Otherwise there are too many moving parts (though there might be a result here that I am unaware of). Hope that makes sense, glad it's becoming clearer for you!
Thank you. Amazing video. Can you please add more videos about the consumer problem? There aren't any. Please, substitution effect, income effect. We have it in the books. But I like your videos. Thank you🙂💛👌
Here it is, Income and Sub effects: ua-cam.com/video/Qg5Bc-RMxvs/v-deo.html, I'll probably do a few more on the topic of consumer choice over the next while, but they do take time and students move past the topics quickly, so hope the current are helpful :)
i want to say thank you for this video .i need asking some question for you Some people will pay a higher price for brand-name goods. For example, some people buy Rolls Royces and Rolex watches to impress others. Does knowingly paying higher prices for certain items just to be a “snob” violate the law of demand?
@@econhelp_official help teacher I'm ask this question some prof. they will say " this isn't a violation of the law of demand. Some people are interested in the outward appearance of purchasing goods...they are willing to pay more for good that provide that. The key is to recognize that any good is a bundle of attributes...some of which are tangible and some of which are intangible."
Sorry I didn’t see this comment! Yes you could take this view. Basically the argument is that as the price changes the good itself changes (because you value it differently the more expensive it is and visa versus), so we can’t change the price ceteris paribus. I would follow your teacher here.
Hello. I really don't understand why demand curves are sometimes drawn straight lines and are sometimes curved? Is there a differece between the tow shapes ?
Good question! A couple of factors 1) linear demand curves are easy to draw and write in the form of an equation, so we usually teach linear demand curves at the first year level rather than curved 2) there is a type of demand curve that is convex to the origin called 'constant elasticity of demand' which is popular amongst economists - the slope goes from steeper to flatter. For these demand curves, the elasticity is exactly the same across all points of the demand curve. Let's consider this case of 'constant unitary elasticity of demand' where the the elasticity is always one: for the portion of the demand curve with higher prices and lower quantities, changes in the price will give us relatively small percentage changes, and a changes in quantity will give us relatively large percentage changes. If the elasticity is equal to (negative) one, then these percentage changes will be equal in magnitude, so we will need a small quantity change and a large price change (this will give us a steep slope). For the portion of the demand curve with lower prices and higher quantities, the opposite is true, changes in the price will give us relatively large percentage changes, and a changes in quantity will give us relatively small percentage changes. If we want to make these percentage changes equal, so we will need a large quantity change and a small price change (flat slope). I hope that helps?
@@econhelp_official thank you so so much ,you are an amazing professor , i finally am not confused anymore , thank you so much for explaining and teaching us .
Well, I am preparing for my final exam and your video just helps me understand a concept that has bothered me for a long time. Thanks a lot.
Awwww cool I hope you did well!! ❤️❤️
So glad I found your video. Really helped me a lot. Thanks a ton. You earned a new subscriber. Keep making more such videos.
Thanks for the sub and the encouragement!! I'm so happy to help and so glad you like my content! ❤️
I know that you probably won't see this comment but I'd like to sincerely thank you for making me understand this concept after watching almost 3 videos now! Definitely will subscribe and like this video!
Absolutely saw it! Thanks for the lovely comment I'm so glad I could help! Good luck with your study :) :)
Great video! I was looking for a more intuitive explanation of why it works like that and this makes a lot of sense :)
Thanks Natalia! I hope everything is going well with your study 📚
Amazingly explained!....Thank you so much! :)
Cheers, thanks for the comment! That's so nice!! :) Good luck with your study.
@@econhelp_official That's the least I can do to encourage and support knowledge imparters like you! :)....
thank you so much for explaining! very simply put and well to understand
You’re welcome! good luck with your study 📚 ❤️ I’m sure you will do great 👍
My textbook mentions steeper demand curves tend to be inelastic (with greater slopes) whereas flatter curves elastic. But along the same curve you characterise both elastic and inelastic regions as well? I’m a bit confused by this
Yeah it's a confusing one, I will do a video on it when I have time. When we compare two curves, we can talk about whether one demand curve is more or less elastic relative to another. So if you put two curves side by side, for the same price change, the steeper curve will lead to a smaller change in demand, so will be less reactive to the price change, i.e. be more inelastic (relative to the other curve). We can call this 'relative elasticity'. At the limit of this, our horizontally straight demand curves are perfectly elastic, whilst our vertically straight demand curves are perfectly inelastic. If we want to talk about elasticity at a point, or within a region, along a single demand curve, we use our elasticity formula e = dq/dp*P/Q. It is this value that is being addressed in this video, and this value will change along a single curve. I don't think I mention it in the video but since dq/dp is the inverse of the slope, and the slope of a straight line is constant, so dq/dp is also constant. That's the first part of our elasticity formula 'e'. As we move along the curve however the ratio of P/Q changes, from large (where we have high P, low Q) to small (low P, high Q), and this really drives the change in 'e' as we move along the curve. The distinction between relative elasticity (what your book discuses in referring to the slope) and elasticity along (or on) a single curve is typically not well addressed in the books and is often a source of confusion. I found this as a resource that is good: pressbooks.bccampus.ca/uvicecon103/chapter/4-3-calculating-elasticity/ In particular see the summary: "Whereas hard labels such as elastic, unit elastic, and inelastic can be used to describe specific sections of supply and demand curves (based on a calculated value), when comparing two curves everything is relative." - If you can't get your head around it, ask your teacher, it's a good question! Hope that helps, good luck with your study :)
@@econhelp_official Thank you! It does feel a lot clearer now indeed! One small question- if you have two demand curves that go through the same point; will their elasticity in that point differ only because of the different values for dq/dp (while P/Q in that point is the same for both)? So if one of them is relatively steep (thus relatively inelastic), its elasticity in that point will be greater because of the greater value for dq/dp?
I'm kind of synthesizing relative elasticity and zone elasticity by imagining, for example, a market equilibrium in the elastic region of the demand curve; a positive supply shock that shifts the supply curve to the right causes P* and Q* to move to the more inelastic regions of the demand curve. And so the steeper the demand curve, the further that same supply shock would shift market equilibrium to the inelastic region on the demand curve?
@@maxfiction "if you have two demand curves that go through the same point; will their elasticity in that point differ only because of the different values for dq/dp (while P/Q in that point is the same for both)?" Yes exactly. dq/dp is the inverse of the slope, so say one slope = -2 and the other is -1. The first should come out more inelastic than the other at any point, or over any region, because it's steeper. The dq/dp is -1/2 and -1 respectively. Say P = 10 and Q = 10 so that P/Q = 1 then the elasticities are -1/2 and -1 respectively. The absolute value of the latter is larger, hence our intuitions are confirmed - it's more elastic. "a positive supply shock that shifts the supply curve to the right causes P* and Q* to move to the more inelastic regions of the demand curve." Yes, though we could just be moving in the elastic region, so we might want to express this as, as long as there is some slope to the demand curve, you will go from a more elastic to less elastic (maybe inelastic) region as the price decreases (as a result of a shift in supply, say). "And so the steeper the demand curve, the further that same supply shock would shift market equilibrium to the inelastic region on the demand curve?" Maybe, I'm not sure since there are a few moving parts here, I have to think more. The issue is that if we superimpose the same supply shift over two different curves, the price change will be different. So if we hold the change in supply fixed, we will get two different changes in price and two different quantity changes, which (for me at least) is a confusing situation if we want to then compare elasticities, or changes in elasticities. On-top of that what matters when thinking about regions of the curve is where the equilibria lie on each curve. So I'm actually not sure. I think this is why, usually, when we explain elasticities we hold the price change (or price) fixed rather than talking about holding fixed a supply shift, or really any equilibrium result. So like you did in the first part of the comment when you were thinking about the elasticity at some fixed price. Otherwise there are too many moving parts (though there might be a result here that I am unaware of). Hope that makes sense, glad it's becoming clearer for you!
Thank you. Amazing video. Can you please add more videos about the consumer problem? There aren't any. Please, substitution effect, income effect. We have it in the books. But I like your videos. Thank you🙂💛👌
Hi Alfonsina! Good suggestion, I will try over the next few weeks, I'll let you know if I get any up :)
@@econhelp_official 👌💛🙂there is no rush
Here it is, Income and Sub effects: ua-cam.com/video/Qg5Bc-RMxvs/v-deo.html, I'll probably do a few more on the topic of consumer choice over the next while, but they do take time and students move past the topics quickly, so hope the current are helpful :)
@@econhelp_official 🙂👏thank you for all your help! Your videos are great. I hope you can rest and have a great weekend.
i want to say thank you for this video .i need asking some question for you Some people will pay a higher price for
brand-name goods. For example, some people
buy Rolls Royces and Rolex watches to
impress others. Does knowingly paying higher
prices for certain items just to be a “snob”
violate the law of demand?
I think maybe the concept of a Veblen good might help you here? www.investopedia.com/terms/v/veblen-good.asp let me know!!
@@econhelp_official help teacher I'm ask this question some prof. they will say " this isn't a violation of the law of demand. Some people are interested in the outward appearance of purchasing goods...they are willing to pay more for good that provide that. The key is to recognize that any good is a bundle of attributes...some of which are tangible and some of which are intangible."
Sorry I didn’t see this comment! Yes you could take this view. Basically the argument is that as the price changes the good itself changes (because you value it differently the more expensive it is and visa versus), so we can’t change the price ceteris paribus. I would follow your teacher here.
@@econhelp_official nothing special prof i follow .here is his yt link www.youtube.com/@DrAzevedoEcon
Hello. I really don't understand why demand curves are sometimes drawn straight lines and are sometimes curved? Is there a differece between the tow shapes ?
Good question! A couple of factors 1) linear demand curves are easy to draw and write in the form of an equation, so we usually teach linear demand curves at the first year level rather than curved 2) there is a type of demand curve that is convex to the origin called 'constant elasticity of demand' which is popular amongst economists - the slope goes from steeper to flatter. For these demand curves, the elasticity is exactly the same across all points of the demand curve. Let's consider this case of 'constant unitary elasticity of demand' where the the elasticity is always one: for the portion of the demand curve with higher prices and lower quantities, changes in the price will give us relatively small percentage changes, and a changes in quantity will give us relatively large percentage changes. If the elasticity is equal to (negative) one, then these percentage changes will be equal in magnitude, so we will need a small quantity change and a large price change (this will give us a steep slope). For the portion of the demand curve with lower prices and higher quantities, the opposite is true, changes in the price will give us relatively large percentage changes, and a changes in quantity will give us relatively small percentage changes. If we want to make these percentage changes equal, so we will need a large quantity change and a small price change (flat slope).
I hope that helps?
@@econhelp_official thank you so so much ,you are an amazing professor , i finally am not confused anymore , thank you so much for explaining and teaching us .