A Level Economics:

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Neha Gupta

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Thanks Muhammad..
Is there any mathematical derivation, which proves that PES remain constant if curve start from origin?
 
AlphaCentauri

AlphaCentauri

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Neha Gupta said:
Thanks Muhammad..
Is there any mathematical derivation, which proves that PES remain constant if curve start from origin?
Click to expand...

Trigonometry. Similar triangles.

PES = Change in Quantity. Price/ Change in Price. Original Quantity

Gradient is = Change in P/ Change in Q [y-axis/ x-axis] ==> Reverse of what is in the PES formula.

It's misleading to conclude on Price Elasticity based on gradients or PED too, for a straight line, should've been constant. Use similar triangles. It's constant because, and only when, it starts from 0.
 
Muhammad Bin Anis

Muhammad Bin Anis

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AlphaCentauri said:
Trigonometry. Similar triangles.

PES = Change in Quantity. Price/ Change in Price. Original Quantity

Gradient is = Change in P/ Change in Q [y-axis/ x-axis] ==> Reverse of what is in the PES formula.

It's misleading to conclude on Price Elasticity based on gradients or PED too, for a straight line, should've been constant. Use similar triangles. It's constant because, and only when, it starts from 0.
Click to expand...

explain me in a pvt msg please
 
AlphaCentauri

AlphaCentauri

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Muhammad Bin Anis said:
yes for sure.

a straight line has a
constant gradient
Click to expand...

I gave the formula. So, from there PES = Change in Quantity. Price/ Change in Price. Original Quantity is constant since it is the reciprocal of the gradient.
But that isn't the reason why PES is 1, i.e. constant. It's 1 because when it starts from O, Price/ Original Quantity is equal to the reciprocal of the gradient, so they both cancel out. Use the properties of similar triangles to see it:
http://www.mathsteacher.com.au/year9/ch13_geometry/08_similar/Image3026.gif

Now, if we go by the reason you gave, so a straight line that does not start from 0 too should have a constant PES-- which it doesn't. If I start it from the price-axis I don't get a triangle. So, only the red part I highlighted above remains constant, and PES will therefore depend on Price/ Original Quantity. It's better to understand the logic using the demand curve, where even a straight line demand 'curve' has no constant PED, it can vary from 0 to infinity if the demand curve touches both axes.

Price/ Original Quantity => If quantity is zero, PED = Infinity
=> If price zero, PED= 0.

Muhammad Bin Anis said:
no prob bro .. u can xplain here :)
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Sis*

You're getting me?
 
H

hardik

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i m frm india....how is ur book available.....how can i get it............???????????????
 
shanky631

shanky631

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2012-09-11_15-56.jpg

can anyone tell me the valid points to be written for this question. and what is the link between diminshing marginal returns and economies of scale???
 
Qamar Baloch

Qamar Baloch

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7B At the start input was 6+2=8 and output was 100. At the end input was 4 + 12 = 16 that is double and output was also double from 100 to 200. So, it satisfies the criteria of constant returns to scale. It is, double the input if output is also double, it is constant returns to scale.
urvesh said:
Hi Qamar sir and others.

Please explain: http://www.xtremepapers.com/papers/CIE/Cambridge International A and AS Level/Economics (9708)/9708_w11_qp_32.pdf

Q7. Answer is B.

Thanks! :cool:(y)
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shanky631

shanky631

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hello Qamar sir, can u plz help me with the structured question from paper 4 which i posted above.
 
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