Economics Presentation

Welcome To our Presentation

Group # 8

Prepared For:

MR. SAMIR KUMAR SHEEL Associate Professor Department of Marketing University of Dhaka

Group Profile Sl No

NAME

Roll

1

Md. Ahidur Rahman

150

2

Md. Abul Kashem

152

3

Md. Zafar Ahmed

154

4

Sayed Parvez

156

5

Md. Enamul Haque

158

6

Tanzila Ahmed

162

7

Frizea Talukder

164

8

Md. Tausif Al Muktadir

166

9

Rumim Ahmed

168

10

Md. Ibrahim Khalil

170

Topic

a) Elasticity Of Demand

Meaning Of Elasticity • The term Elasticity expresses the degree of correlation between demand and Price. • The elasticity of demand is a measure of the relative change in account purchased in response to a relative change in price on a given demand curve. - Mayer A.L. • The elasticity of demand, at any price or at any output, is the proportional change of amount purchased in response to a small change in price, divided by the proportional change of price Mrs. Joan Robinson

Classification of Elasticity of Demand • From the viewpoint of Elasticity Demand May be two types: a. Elastic Demand b. Inelastic Demand

Elastic Demand • When the rate of change in demand is greater than the rate of change in price is said to be elastic Demand

Inelastic Demand • When the rate of change in demand is less than the rate of change in price is said to be Inelastic Demand

Five Cases Of Elasticity • There are five cases for measuring the price elasticity of demand. they are: (a) Elasticity greater than one[ed>1] (b) Elasticity less than one[ed<1] (c) Elasticity equals to one[ed=1] (d) Perfect elasticity (e) Imperfect or zero elasticity[ed=0]

Elasticity greater than one [Ed > 1]: • If the change in demand is greater than the change in price, Then it is said to be elasticity greater than one [ed>1]. It is also called elasticity of demand

Elasticity less than one [Ed < 1]: • If the change in demand is less than the change in price, Then it is said to be elasticity less than one [ed<1]. It is also called inelasticity of demand.

Elasticity Equals to one [Ed = 1]: • If the rate of change in demand and the rate of change in price are equal, Then it is said to be elasticity equals to one [ed=1]. It is also called unit elasticity

Perfect Elasticity • If a little change in price of a particular product causes a severe effect on the change in demand of that particular product, then it is said to be perfect Elasticity.

Imperfect Elasticity • If the change in price of a product does not have any impact on the change in demand, then it is said zero (0) elasticity

Md. Abul Kashem Roll : - 152

Price Elasticity Proportion Change in amount Demanded Price Elasticity = Proportion Change in Price

Change in Demand / Change in Price = Amount Price

Income Elasticity •

Income elasticity is a measure of responsiveness of potential buyers to change in income. It represents the ratio of change in demand of product as with the change in income of the consumer concerned.

•

It is of four types:

1. Positive Income Elasticity of Demand 2. Negative Income Elasticity of Demand 3. zero Income Elasticity of Demand 4. Other types of Income elasticity

Cross Elasticity of Demand • The relationship between changes in the price of one commodity and the resulting changes in the quantity demand of another commodity is described as the cross elasticity of demand. • It has three types: 1. Positive cross Elasticity of Demand 2. Negative cross Elasticity of Demand 3. Zero cross Elasticity of Demand

Different Type of Goods • With the concern of elasticity of demand, we can differentiate goods or products into four distinct types. They are – 1. NORMAL GOODS 2. INFERIOR GOODS 3. GIFFEN GOODS 4. VEBLEN GOODS

Frijea Talukder Roll: - 164

Factors determining Elasticity • Availability of Close Substitutes • The Importance of a commodity in Consumer’s Budget • The number of users of a Commodity • Complimentarily between goods • Level of Incomes • Time for Adjustment

Measurement of Elasticity • Three methods have been suggested for the measurement of elasticity: 1. Total Outlay Method. 2. Proportional Method. 3. Geometrical Method.

Total Outlay Method • According to this method, we compare the total outlay of the purchase before and after the variation in price. Elasticity of demand is expressed in three ways: • 1. Unity (Unitary Elasticity) • 2. Greater than Unity • 3. Less than Unity

Proportional Method • In this method, we compare the percentage change in price with the percentage change in demand. The elasticity is the ratio of the percentage change in the quantity demand to the percentage change in price change.

Geometrical Method • Point Elasticity: This method tells us how measure elasticity of demand at any point on a demand curve. Elasticity is represented by the fraction distance from D to a point on the curve divided by the distance from the other end to that point.

Arc Elasticity • Any two points on a demand curve make an Arc. The area between P and M on the DD curve in this figure is an arc which measures elasticity over a certain range of prices and quantities

Md. Ahidur Rahman Roll: - 150

• Price Elasticity of Demand and Total Revenue. • The Gradient (Slope) of The Demand Curve. • Shifts in the Demand Curve

Practical Application of Elasticity of Demand • • • • • • • • • • •

Taxation Monopoly Market Appraisal Economic policies International Trade Rate of Foreign Exchange Increasing Returns Output Wages Poverty in plenty Effect on the economy

Tanzila Ahmed Roll: - 162

Topic: b) Government Intervention In Market refers to Bangladesh

Price Control • Price Floor : Here the govt. sets the minimum price above the equilibrium price and the result will be a surplus of production or supply

Reasons of Price Floor • To Protect the Producer’s Income • To Create a Surplus • In the case of Wages (The Price of Labor)

Price Ceiling • If the government imposes price ceiling then prices will be set below the equilibrium price and the result will be shortage of supply.

Tax Imposition By Bangladesh Government

• Revenue receipt of a government consists of two parts: – Tax-revenue – Non-tax revenue

Major Heads of Tax Revenue in Bangladesh • A.

Taxes on Income and Profit

• 1. • 2.

Income tax-Companies Income tax-Other than Companies

• B.

Taxes on Property & Capital Transfer

• • • • • •

Estate Duty and Gift Tax Wealth Tax Narcotics Duty Land Revenue Stamp duty-non-judicial Registration

1. 2. 3. 4. 5. 6.

• • • • • • • •

C. 1. 2. 3. 4. 5. 6. 7.

Taxes on goods and services Customs Duties Excise Duties Value Added Tax (VAT) Supplementary Duty (On luxury items VAT) Taxes on Vehicles Electricity Duties Other Taxes and Duties (travel tax, turn over tax, etc.)

Major Heads of Non-Tax Revenue in Bangladesh • • • • • • • •

D. Interest, Dividend and Profit E. General Administration and Services F. Social and Community Service G. Economic Services H. Agriculture and Allied Services I. Transport and Communication J. Other non-tax revenue K. Capital Revenue

Government Rejection of Market Allocation • This section examines two extreme cases: • i) Providing goods and services free at the point of delivery (e.g. Treatment in National health service hospitals and education in state schools) • ii) Prohibiting the sale of certain goods and services (e.g. certain drugs, weapons and pornography)

Agriculture and Agricultural Policy • THE REASONS OF GOVERNMENT INTERVENING:

The following are the most commonly cited problems of a free market in agricultural products: 1. AGRICULTURAL PRICES ARE SUBJECT TO CONSIDERABLE FLUCTUATIONS 2. LOW INCOMES FOR THOSE IN FARMING 3. TRADITIONAL WAYS OF LIFE MAY BE DESTROYED: 4. COMPETITION FROM ABROAD

Types of Government Intervention • There are five main types of government intervention in agriculture. They are – • 1. BUFFER STOCKS • 2. SUBSIDIES • 3. HIGH MINIMUM PRICES • 4. REDUCTIONS IN SUPPLY • 5. STRUCTURAL POLICIES

Subsidies in Agriculture from Bangladesh Government • Bangladesh government also pays subsidy. In the financial year 2005-06, government gives Tk. 12 billion subsidies in agricultural sector. • Rate of Subsidies: Sector Rate Import fertilizer 25% Rural electrification used for irrigation 20% Exporting Agro-based industries 30% Electricity used in agro-based industry 20%

Thank You All