Economics cpt
Note the sign of 100 is negative.
That itself denotes the elasticity.
As P goes on taking different values, the q gets changed. That is elasticity.
At P =15, Q is 50. Let us increase P by 10%
So?
At P= 15+20% of 15 = 18, Q becomes 80. This is 30% higher than the one we got earlier.
See it is like this.
Elasticity = % increase in Q divided by simultaneous % increase in P
= 60 divided by 20
=3
(Q gets increased by 60% i.e. from 50 to 80, when P gets increased by 20% i.e. from 15 to 18)
Now please try it for some other values of P, by yourself... and I am sure you get the same answer of 3 as elasticity.
Should you face any difficulty, please feel free to communicate
Please mind it very well that the formula to calculate the ELASTICITY is as follows. Plzzzzzzzzzzzzzzzzzzzzzz
Elasticity = delta Q / delta P
Please refer the following link for
https://www.youtube.com/watch?v=-2xh2Fz_XNo
So? Dont worry. Recite the formula and you can get the answer even under examination condition. All the best.
Anyway, since you are inquisitive in your studies, let me ask you one more question.
have you come across with the revenue function of Y = mX + C ?
Y is income,
C is constant (as is called Fixed cost in Accountancy or Costing),
X is the number of units produced/sold (as the case may be).......
and then what is m? It is regarded as the SLOPE of the line.
If you are not bored, should I give you one more question?
02. Yes, I am a chartered Accountant in practice. I have an MBA finance background as well. For past about 20 years, I am closely associated with various MBA institutes in Pune and Bengaluru as a visiting faculty for various subjects like Accountancy, Costing, Security analysis, Risk Management, Quantitative Techniques, Audit and so on..
03. Now my question to you is.... with the same exam,ple viz.
supply function...Q= -100+ 10P. Tell me the ELASTICITY when P is 20.
I think you are getting closer and closer to the concept of elasticity. Right?
Now please try to find it out for various values of P like say 12 and 25
(Compare these results with each other... that is of 12, 15, 20 and 25. And then get back to me with your observation about this comparison)
What i said was to mean that AT P=15, the answer will remain same..( for all the students.)
Now if you still have some curiosity left, try to compare the answers when P =12... 15... 20 and 25.
You passed that test....many a students BLINDLY follow the answer. You did not do that. You solved it by yourself and came with correct answer ..of 2...
Congratulations.
And now try to compare the elasticity with different values of P and you will come to know the BASIC yet SIMPLE thing about elasticity. Bless you.
As P starts travelling away from 10, the elasticity is LESS.
OR you can say as Price starts increasing, it becomes LESS elastic.
http://www.yourarticlelibrary.com/economics/income-elasticity-of-demand-concept-meaning-and-determinants/10628/
http://www.yourarticlelibrary.com/economics/elasticity-as-demand/the-elasticity-of-demand-economics/24798/
Income elasticity and Demand elasticity.
Please accept my hearty congratulations.
Wish you a grand success in your next group.
Do study hard, keeping your inquisitiveness INTACT.
All the best.
For any query you may reach through my e mail id as well
amolshankar@gmail.com
amol@vpraca.com
Once again hearty congratulations.
Audit proves out to be difficult when it comes to answer the question.
What I suggest would be "write down the answers given in suggested answers of ICAI" This will increase the understanding of intricacies of the answer. Give it a try.
You need to write down at least 5-6 papers...ok?
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