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November 16, 2016 at 6:50 am
I am not clear in the lecture which one is dollar or units. Thanks.
John Moffat says
November 16, 2016 at 5:27 pm
Which one of what?
November 18, 2016 at 7:28 am
a=$100+($0.5 x 1000 units) = $600
Is it not necessary to put either dollar or units?
November 18, 2016 at 3:13 pm
No – why should it be necessary? You don’t have the time in the exam to keep writing units or dollars (and it the MCQ’s it is irrelevant anyway since nobody will look at your workings 🙂 )
November 18, 2016 at 5:42 pm
Noted with thanks.
November 19, 2016 at 4:36 am
You are welcome 🙂
October 26, 2016 at 9:09 am
Hi thank you for the great lectures and notes. Just a quick question, I understand how to calculate the price elasticity of demand however I get -32 rather 32 for the answer to part a. In the answers it’s showing as 32. Similarly with part b).
For %change in price= (15.5-16)/16*100=-3.125%
If it is -32 does this mean that demand is not very sensitive to price changes as the PED is low?
Thanks for your help
October 26, 2016 at 10:02 am
Arithmetically, the elasticity will always be negative (because a lower price will mean higher demand, and vice versa), so we don’t usually bother writing the ‘-‘.
A higher PED (ignoring the ‘-‘) means that the demand is more sensitive to the demand.
October 26, 2016 at 10:50 am
Thank you for clarifying
October 26, 2016 at 2:00 pm
April 12, 2016 at 6:07 pm
Nonetheless your lectures are enjoyable, makes easy understanding too… (though you should drink water more often whiles lecturing)…lol
April 12, 2016 at 6:04 pm
please Mr. Moffat, why are there not any download tab or button to the lecture videos?…
I wish I could download them and be able to watch wherever I am (without the internet connection)
April 13, 2016 at 6:51 am
Lectures can only be watched online – it is the only way that we can keep this website free of charge.
February 26, 2016 at 10:56 am
Hey there John, could you help me out here? if the price is increasing from $12 to $13, its a $1 increase. and with this change the demand falls from 16000 to 13500 units i.e a -2500 change, according to the gradient rule, +1/-2500= -0.0004? so wouldn’t b be -(-0.0004)=+0.0004?
February 26, 2016 at 3:43 pm
On the formula sheet b is defined as the change in price over the change in demand. It is minus b in the equation to reflect what you have written.
Look at the resulting equation and think about it – it would be nonsense if higher demand went with a higher selling price (which is what would happen if you did what you want to do).
This is not a maths exam – it is meant to be practical 🙂
January 23, 2016 at 7:08 am
Why didnt we just divide 1 by 2500 to get b?why did we have to use the 2 equations?
January 23, 2016 at 7:11 am
Never mind 😛 you answered it in the lecture
January 23, 2016 at 8:00 am
September 30, 2015 at 7:47 pm
First of all i am going to comment here for the very first time. I never saw such a outstanding lectures in my life. And most importantly you are providing with these helpful lectures to all students of A.C.C.A . I am very thankful to you. Now i have a question, Dear Sir in your notes, you stated the formula of PRICE ELASTICITY OF DEMAND= % change in demand divided by % of change in price but while calculating B , you took change in price over change in demand. Are they separate things may be i am misunderstood ? and if they aren’t then why there is a change in formula ?
Thanks in advance 🙂
October 1, 2015 at 6:41 am
Thank you for your comments 🙂
They are two different things. B measures how the price and demand change with each other. Elasticity looks in percentages to measure how big or small the effect of a change on price will be.
Kerri - Ann says
April 22, 2015 at 10:29 pm
Good Day John,
Hope all is well. Glad to be back with you.
I am doing Example 3 in Chapter 7 (Price Elasticity of Demand) and I am a bit confused.
The PED is = % change in demand / % change in price
Therefore to answer the example my formula should read:
((D2- D1)/D1))*100 ((200-100)/100))*100 = 100
————————– ——————————– ——- = 30.12
((P2- P1)/P1))*100 ((16 – 15.5)/15.5))*100 = 3.32
Am I correct?
April 23, 2015 at 9:39 am
The top bit is correct, but for the demand to increase the price has to fall from 16 to 15.5, and so the bottom of the formula should be (15.5-16)/16.
The answers to all of the examples are at the back of the Lecture Notes (see the contents page) 🙂
April 23, 2015 at 12:33 pm
Or so the demand increases but the price decreases and so the formula would change to the bottom. Got it.Thanks
April 9, 2015 at 7:17 am
Sorry for using this forum, but if possible can you guys change the VIMEO player or uploader to youtube. I have been experiencing a tough time in watching the videos in this player for the past 3 weeks, but when it is the ones uploaded in youtube i don’t have problems. I also viewed the technical help you offer and realized all my players are up to date, and the network has a good strength.
April 9, 2015 at 10:10 am
Sorry, if you can watch YouTube videos, than Vimeo should all work.
You don’t even mention what browser or device you are using.. Or what country
YouTube js blocked in far more countries than Vimeo, and we won’t change to YouTube im afraid
April 9, 2015 at 7:38 pm
Thanks for the reply. Am using Adobe Flash player (updated) and also using google crome (updated). Since you are not going to change is there any other option.
April 10, 2015 at 2:43 am
Try tor browser
December 17, 2014 at 6:48 pm
I am totally confused …….during the formula when he arrives at – 1 = 0 -2500b
how on earth did he manage to do 1/2500 ? when they are minus numbers ?
December 17, 2014 at 7:09 pm
‘He’ is me!!
If -1 = -2500b
then divide both sides by -2500, and 1/2500 = b
(You should know from school that dividing a negative number by a negative number results in a positive number)
January 1, 2015 at 10:48 am
I wish there was a like button 🙂
November 8, 2014 at 7:01 pm
If we start from 16 and demand of 100, then changing to 15.5 means that demand goes up from 100 to 200 – a percentage change of (200-100)/100 = 100%
Price goes from 16 to 15.5 which is a percentage change if (16 – 15.5)/15 = 3.33%
The formulae you wrote were wrong. It should be P2 – P1 / P1; and D2 – D1 / D1
November 6, 2014 at 5:24 pm
hello sir, i am a bit confused with example 3 i used the formula
% change in price=(P1-P2)/P2*100
% change in demand=(Q2-Q1)/Q2*100
when i am applying this formula to the question example 3 i am getting the answer as 16 for the first one and 7.25 for the second one. And behind the book its different answers which do not match mine. i am very confused sir please reply 🙁
November 6, 2014 at 5:31 pm
I am not sure what to answer, because the solution at the back of the notes shows the workings.
You do not say how you managed to arrive at 16 and 7.25.
If you say how your workings were different from the answer then I will try and explain where you have gone wrong.
November 8, 2014 at 3:19 pm
P1 is 16 P2 15.5 Q1 100 Q2 200
So the formula applies as PED=%QD / %PRICE
October 3, 2014 at 4:42 pm
I do not like this part of the exam at all… 🙁
November 1, 2014 at 8:02 pm
I’m with you.. It’s a part with the paradox – seems obvious yet so obscure and elusive
November 2, 2014 at 6:42 am
Bad times my friend. Second time around I’m understanding it more. Whether that has something to do with not doing two papers at once which isn’t diluting my time or not… We shall see.
September 21, 2014 at 8:21 pm
For example 4, may I ask what would be the action if, a, was left as a positive figure and not 0?
September 22, 2014 at 6:04 am
I am not sure what you mean, because a is not zero.a is the selling price that would result in the demand being zero.
As the selling price is reduced the demand will increase.
September 8, 2014 at 9:59 pm
Example 4, page 28. I’m not quite sure how you got 18.4 by adding 6.4 to both sides of the equation. Can you clarify please?
September 9, 2014 at 7:11 am
They sell 16,000 units at a price of $12.
The maximum price (a) is the price at which the demand is zero – i.e. demand lower by 16,000.
For every 2,500 lower demand, the price is increased by $1. So for 16,000 lower demand, we need to increase the price by 16,000/2,500 x $1 = $6.40
So maximum selling price (a) = 12 + 6.50 = $18.40
September 14, 2014 at 11:17 am
Of course, thanks John.
September 14, 2014 at 11:22 am
You’re welcome, Carmel 🙂
April 19, 2014 at 4:49 pm
I’m stuck on example 6 chapter 7. Selling price £100 p.u demand 20,000 per annum. For every £2 change in selling price demand will change by 2000 units. On looking at the answer P=120-0.001Q I get where the 0.001 comes from but where do you get the 120 from?
April 19, 2014 at 5:21 pm
The best way to remember it is : a = current selling price + b (current demand)
April 20, 2014 at 8:40 am
Sorry can you expand please selling price is £100 plus current demand? Isn’t that 20,000 pa because b = £2/2000.
April 20, 2014 at 10:20 am
I’ve woken up sorry I didn’t multiply 0.001 with demand of 20000 to give 20+100=120
October 10, 2013 at 1:19 pm
Hi i have a lil doubt… minus minus is plus …so how we got -2500 b …we supposed to add 16000 and 13500 and get -29500 instead
October 10, 2013 at 5:23 pm
Minus minus is indeed a plus.
However, we are taking minus 16,000 plus 13,500.
-16000 + 13500 = -2500
(look again – it is minus 16000!)
April 27, 2013 at 4:48 pm
Good job! Thank you Lecturer you are so loud and clear!
April 13, 2013 at 3:06 pm
i love this. thank you
March 15, 2013 at 8:36 pm
Conventional way of calculating the slope of the demand curve is Changes in Quantity/Changes in Price. Why does ACCA Text use Changes in Price/Changes in Quantity? However, I do understand a slope of a straight line is Changes in Y/Changes in X.
March 16, 2013 at 10:47 am
I don’t know why you say the conventional way of calculating the slope is change in demand/change in price.
For the price elasticity of demand, then it is demand / price, but the conventional price/demand equation is P = a – bQ for which the slope is b which is change in price/change in demand.
March 15, 2013 at 12:17 pm
Thank you very useful lecture, any chance adding/providing video lecture on Example 3 Price elasticity? Its on the notes.
March 5, 2013 at 11:03 pm
Very nicely explained…..:))
February 15, 2013 at 11:18 pm
very very easy way to calculate the b ,a….?the formula in books is very hard to remember.
October 27, 2012 at 9:51 am
Good Explanation. Good Job!
October 17, 2012 at 8:34 am
What’s wrong? The video always break down in process? How to avoid this. Thanks!
October 3, 2012 at 7:36 pm
Example 5 says reduction in price causes increase in demand rather than increase in price and decrease in demand. So shouldn’t the equation be 10-0.01Q??
October 17, 2012 at 1:37 pm
@musema, Because we assume that the relationship is linear, a reduction in price causes an increase in demand, and an increase in price causes the same reduction in demand.
The equation cannot be P = 10 – 0.01Q, because that would mean that the current demand of 2000 would give a selling price of 10 – 20 = -10!!!
The lecture is correct.
June 8, 2012 at 9:42 am
As I see, “Price elasticity” topic is not mentioned in the videos to chapter 7. Or I missed it?
July 13, 2012 at 11:24 am
@natasya, You are right – it is not mentioned. I will re-record it shortly but until then you can find it in the course notes.
May 8, 2012 at 6:11 pm
lovely. good job
April 10, 2012 at 5:26 am
March 20, 2012 at 11:30 am
good work from you guys.may God bless you
March 11, 2012 at 2:28 am
very well explained, great job!
March 6, 2012 at 8:19 am
thanks,i perfectly understood
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