Demand, supply and elasticity
Introduced| English | Meaning |
|---|---|
| demand/dɪˈmænd/ | The quantity of a good or service that buyers are willing and able to purchase at different prices over a period. |
| supply/səˈplaɪ/ | The quantity sellers are willing and able to offer at different prices over a specified period. |
| equilibrium/ˌiːkwɪˈlɪbrɪəm/ | A state in which opposing influences balance so there is no tendency for the relevant quantities to change. |
| quantity demanded/ˈkwɒntɪti dɪˈmændɪd/ | The amount buyers are willing and able to purchase at a particular price over a specified period. |
| price elasticity of demand/praɪs ɪlæˈstɪsɪti ɒv dɪˈmænd/ | The percentage change in quantity demanded divided by the percentage change in price. |
| elastic/ɪˈlæstɪk/ | Describing demand or supply whose percentage response exceeds the percentage change in its determining price or income. |
| inelastic/ɪnɪˈlæstɪk/ | Describing demand or supply whose percentage response is smaller than the percentage change in its determining price or income. |
| revenue/ˈrevənjuː/ | Income received by a business from selling goods or services before costs are deducted. |
The market sets the price
- A firm would love to charge whatever it likes — but the market has the final say, through demand 需求 and supply 供给.
- Understanding how they interact is the foundation of pricing and forecasting.
The equilibrium price is where:
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Equilibrium clears the market.
Demand, supply and equilibrium 均衡
- Demand falls as price rises; supply rises as price rises.
- The market settles at the equilibrium price, where the two are equal.
The equilibrium price is where quantity demanded 需求量 equals quantity supplied.
Demand, supply & elasticity
Price is set where demand meets supply.
Price rises 10% and quantity demanded falls 25%. What is the size of PED?
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PED = 25% / 10% = 2.5 (elastic).
A product with many close substitutes tends to have elastic demand.
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Substitutes let customers switch, making demand price-sensitive.
When quantity demanded responds strongly to price, demand is said to be ______.
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Elastic demand has PED greater than 1.
Price elasticity of demand 需求价格弹性
- PED measures how much quantity demanded responds to a price change.
- Elastic 富有弹性 (PED > 1): quantity is sensitive to price; inelastic 缺乏弹性 (PED < 1): it is not.
If demand for a product is inelastic, raising its price will:
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With inelastic demand, quantity falls little, so revenue rises.
Why elasticity matters for revenue 营业收入
- If demand is inelastic, raising price raises revenue.
- If demand is elastic, raising price lowers revenue — so a firm may cut price to sell far more.
Know your elasticity before changing price. A price rise helps revenue only if demand is inelastic. For an elastic product, the same rise drives customers away and revenue falls.
You've got it
- price settles at equilibrium, where demand meets supply
- PED measures demand's sensitivity to price (elastic >1, inelastic <1)
- inelastic → raise price to raise revenue; elastic → the opposite