Cross elasticity of demand발음듣기
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Cross elasticity of demand
99문장
100% 한국어
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출처 : 칸아카데미
Cross elasticity of demand
So far we've been focused on elasticity of demand for only one good, we've thought about how changes in the price of that good affect changes in its quantity.
Now we are going to explore is how we can go cross goods.
So we are going to talk about the cross elasticity of demand.
And there is multiple different scenarios we can think about.
But its really thinking about how price change in one good might affect quantity demanded in another.
To see a example of this.
Think about two airlines.
Two competing airlines, maybe its the same exact route.
Going at the exact same time, maybe, between New York and London.
So, airline one right over here, airline two, very competitive Price over here is a $1000 for a round trip.
Quantity demanded is 200 tickets, let's say in a given week.
Airline two's price is $1000 for the round trip, the quantity demanded is 200 tickets as well.
Now, let's think about what will happen if Airline 1 raises its price from $1000 to $1100?
We could even do something less dramatic than that.
To $1050.
So, a relatively small increase in price.
Remember when we are thinking about the % price increase, we are thinking about elasticity.
In general, we don't just say -
OK. $50 on top of a $1000 is a 5% price increase.
That's what we would in kind of everyday thinking, if you went from a $1000 to $1050.
You would say that is a $50 increase on a base of a 1000.
Or that is a 5% increase.
When you think about elasticities, because you want to have the same % change between... you go from a 1000 to a 1050 or if you go from a 1050 down to a 1000.
We actually use the average point as the base, so the percent change in this scenario...
I'll write it in quotes because it's a little different than what you do in traditional mathematics, when you think about percent changes.
It's you had a 50 change in price.
Your price went up by 50.
And on our base we'll use 1025, which is the average of 1000 and 1050.
We'll say increase in price, although we'll put that increase in quote because we're using it on the average.
It's 4.9% increase using the midpoint as the base.
Now when that happens - everyone today uses travel site to compare prices if these really are the exact same route going from the exact same airport to the exact same airport, leaving at the exact same time everyone is going to take this one now, because it's only $1000.
Even just $50, why would they ride on this airline.
So this quantity demanded is going to go to 0.
And this quantity demanded is going to go to 400.
We're not going to think about the actual capacity of the plane and all that.
We're gonna have a very simple model here.
So what was the percent change in quantity for airline 2 here?
Well once again, our change in quantity is 200 not 400.
We went from 200 to 400, so we gained 200.
And our base, we want to use the average of 200 and 400 which is 300.
And so this is approximately 67%.
So we have, all of a sudden, our cross elasticity of demand for airline 2's tickets relative to A1's price and we get the % change in the quantity demanded for A2's tickets, which is 67% over the % change not in A2's price change, but in A1's price change.
That's why we call it cross elasticity.
We go from one good to another.
So for simplicity, that's roughly 5%.
So you have a very high cross elasticity of demand.
If you even increase this maybe by $5, you might have had the same effect.
So you would have had a very large number here.
And that situation right here for this cross elasticity of demand is because these things are near perfect substitutes.
The way we set up this problem we said, well people don't care which one they take.
They'll just go for the cheapest one.
When you have nearly perfect substitutes for each other, like this example here the cross elasticity of demand approaches infinity.
It gets higher and higher and higher.
In theory, if these are really, really, really identical even if you raise a penny, people will say, why would I waste a penny?
I would just use airline 2.
And so this number would be even lower here.
So this thing might approach infinity.
And notice, this was positive.
When we just in regular price elasticity of demand the only way that you would increase quantity for a traditional good was by lowering price but here we raised price on a substitute competitive product and we raised the demand for airline 2's product which actually makes a lot of sense.
So it wasn't a negative relationship.
It's actually a positive value here.
But you could have that negative relationship using cross elasticity of demand.
This is the example of a substitute.
We could think about the example of a complement.
So what if we're talking about e-books?
So let's say I have some type of an e-book.
And the current quantity demanded in a given week, I don't know, is 1000.
Let's say the price of an e-reader that you would need for my e-book is $100 but let's say that the price of the e-reader goes down from $100 to $80.
So you had a $20 decrease in price.
Well, what's going to happen to my e-book, assuming its price does not change?
Well then the quantity demanded for my e-book will go up.
So let's say the quantity demanded for my e-book goes up by 100 because more people are going to afford this or they're gonna have money left over when they buy this to buy more e-books,
and so I don't even know what the price for my e-book is, but at a given price point the quantity demanded will go up and so this goes to 1100.
And so I'll leave it to you to calculate this price elasticity of demand but you'll see that you'll actually get a negative value like we used to seeing for regular price elasticity of demand.
And when we do calculate, remember, you want to do your % price change in e-book quantity over percent change in e-reader price.
And the other thing you have to remember, you don't just take -20/100, you take -20 over the average of these two when you're thinking of it in the elasticity context.
So this value right over here is -20 / 90, the average of those two.
This value right over here is going to be +100 over the average of these two, which is 1050.
And so we get - 100/1050 which gets you to about .095.
So about 9.5% change in quantity demanded for my book.
And then this denominator right here is -20 / 90.
So you get a drop of 22%.
If you divide the numerator by the denominator, it's .0952/-.22222... and you get -0.43.
And this make sense.
If you lower the price of the e-reader, this complement product a product that goes along with my e-book, it increases the demand.
Just like you get with price elasticity of demand, you get a negative value over here.
What about completely two unrelated products?
Let's say that I have basketballs.
And the price of basketballs goes from, let's say, $20 to $30.
What's going to happen to my e-book?
Well, my e-book's not gonna change.
They're gonna stay at 1000.
So my % change in the quantity demanded of my e-book is going to be zero in this example when we wanna do this cross elasticity of demand over my % change in basketballs which would be 30/25,
so whatever that is 10/25, I should say, sorry, which is a 40% increase.
So that would be 0/40% which equals zero.
So for unrelated products, products where the price change in one of them does not affect the quantity demanded in the other it makes complete sense that you have a zero cross elasticity of demand.
If they're complements, you'd have a negative cross elasticity of demand.
If they're substitutes, you would have a positive and the closer the substitutes they are, the more positive your cross elasticity of demand is going to be.
번역
0%
So far we've been focused on elasticity of demand for only one good, we've thought about how changes in the price of that good affect changes in its quantity.발음듣기
대기중
But its really thinking about how price change in one good might affect quantity demanded in another.발음듣기
대기중
So, airline one right over here, airline two, very competitive Price over here is a $1000 for a round trip.발음듣기
대기중
Airline two's price is $1000 for the round trip, the quantity demanded is 200 tickets as well.발음듣기
대기중
When you think about elasticities, because you want to have the same % change between... you go from a 1000 to a 1050 or if you go from a 1050 down to a 1000.발음듣기
대기중
I'll write it in quotes because it's a little different than what you do in traditional mathematics, when you think about percent changes.발음듣기
대기중
We'll say increase in price, although we'll put that increase in quote because we're using it on the average.발음듣기
대기중
Now when that happens - everyone today uses travel site to compare prices if these really are the exact same route going from the exact same airport to the exact same airport, leaving at the exact same time everyone is going to take this one now, because it's only $1000.발음듣기
대기중
So we have, all of a sudden, our cross elasticity of demand for airline 2's tickets relative to A1's price and we get the % change in the quantity demanded for A2's tickets, which is 67% over the % change not in A2's price change, but in A1's price change.발음듣기
대기중
And that situation right here for this cross elasticity of demand is because these things are near perfect substitutes.발음듣기
대기중
When you have nearly perfect substitutes for each other, like this example here the cross elasticity of demand approaches infinity.발음듣기
대기중
In theory, if these are really, really, really identical even if you raise a penny, people will say, why would I waste a penny?발음듣기
대기중
When we just in regular price elasticity of demand the only way that you would increase quantity for a traditional good was by lowering price but here we raised price on a substitute competitive product and we raised the demand for airline 2's product which actually makes a lot of sense.발음듣기
대기중
Let's say the price of an e-reader that you would need for my e-book is $100 but let's say that the price of the e-reader goes down from $100 to $80.발음듣기
대기중
So let's say the quantity demanded for my e-book goes up by 100 because more people are going to afford this or they're gonna have money left over when they buy this to buy more e-books,발음듣기
대기중
and so I don't even know what the price for my e-book is, but at a given price point the quantity demanded will go up and so this goes to 1100.발음듣기
대기중
And so I'll leave it to you to calculate this price elasticity of demand but you'll see that you'll actually get a negative value like we used to seeing for regular price elasticity of demand.발음듣기
대기중
And when we do calculate, remember, you want to do your % price change in e-book quantity over percent change in e-reader price.발음듣기
대기중
And the other thing you have to remember, you don't just take -20/100, you take -20 over the average of these two when you're thinking of it in the elasticity context.발음듣기
대기중
This value right over here is going to be +100 over the average of these two, which is 1050.발음듣기
대기중
If you lower the price of the e-reader, this complement product a product that goes along with my e-book, it increases the demand.발음듣기
대기중
So my % change in the quantity demanded of my e-book is going to be zero in this example when we wanna do this cross elasticity of demand over my % change in basketballs which would be 30/25,발음듣기
대기중
So for unrelated products, products where the price change in one of them does not affect the quantity demanded in the other it makes complete sense that you have a zero cross elasticity of demand.발음듣기
대기중
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