3.2. Marginal Revenue and the Price Elasticity of Demand

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来自 University of Illinois at Urbana-Champaign 的课程

微观经济学原理

589 个评分

University of Illinois at Urbana-Champaign

微观经济学原理

589 个评分

This course offers an introduction to the functions of individual decision-makers—both consumers and producers—within the larger economic system. Emphasis is on the nature and functions of product markets, the theory of the firm under varying conditions of competition and monopoly, and the role of government in promoting efficiency in the economy. Most people make the incorrect assumption that economics is ONLY the study of money. My primary goal in this course is to shatter this belief. During this course, we will be addressing the above questions as well as many more relating to: -the environment -love and marriage -crime -labor markets -education -politics -sports -business My main goal is to show you the way economists think and how to use this analytical system to answer questions related not only to these and other important human issues, but to anything you end up doing with your life after this class. After all, as you will quickly find out, I believe that everything is economics!

从本节课中

Firms with Market Power

So, why is it that when you fly the person sitting next to you in the plane probably paid a different price for the ticket than what you paid for it? And why does Starbucks charge so much for its coffee even though you can buy coffee at Dunkin’ Donuts for almost half of that price? This module we are finishing our discussion of the firm by focusing on cases that should be more familiar to you than the perfect competition examples we have been using.

3.1. When Marginal Revenue is Less than Price9:39

3.2. Marginal Revenue and the Price Elasticity of Demand6:01

与讲师见面

Dr. José J. Vázquez-Cognet
Clinical Professor
Department of Economics

So, we're here in the University of Illinois at Urbana-Champaign.

And there's only one small airport here and all cornfields.

So, if you want to fly anywhere, which one would be cheaper, if you fly from

Champaign to New York, which is really far away on the East Coast, or when you fry

from Champaign to Chicago, only 2 hours north?

Which one you think would cost you less, a one way ticket?

Well, I just did a search, right now. And I've done this many years with my

students and it's usually the same. And a Champaign to New York ticket cost

you about $198, one way ticket from Champaign to New York.

And a one way ticket from Champaign to Chicago, which is just two hours from

here, New York is about 13, costs you $407.

Now, clearly, I mean, if you learning anything in this class, one thing that you

do learn is that if you want to travel in this way, you should probably buy the

ticket from Champaign to New York, and don't fly the last leg, and that's a lot

cheaper. Now, currently for probably airlines are

counting that most people aren't doing that.

So, why is that? Why is a ticket to somewhere that were all

far away charge you less than a ticket from somewhere next door?

And the, the answer has to do with the price elasticity of demand and the, the

fact that the companies have to pay attention to that when they have price

power. So, oh, a ticket from, since most airlines

when you fly from here to New York, can take you to different hops, you have three

or four or five different choices of airlines and champagne that can fly you

from here to New York. But between here and Chicago there's a lot

less airlines because some of the airlines don't use Chicago as a hub.

Some of them use Detroit, some of those use Denver, some of them use Atlanta.

So, the number of competitors an airline has between here to Chicago is a lot less

than the number of competitors that you have from here to New York.

That gives the, the, the airlines that are flying from here to New, to Chicago, a lot

of opportunity to markup their price. Because if you want to fly from here to

Chicago, you don't have a lot of options, so your demand for that tickets is very

inelastic. And the company can use that, since they

actually have price power, they can use that to markup the price.

Now, when you fly from here to New York, you have a lot of choices.

So, the company, the airline company, cannot markup the price, because since you

have a lot of choices, your elasticity for the ticket is actually quite, quite high.

It's very elastic. So, therefore they're are not going to be

able to markup the price. Now, what do I mean by markup?

What markup means when a company is charging you a price that is a lot larger

than what it cost you, cost them to provide their good.

So, let's say it cost them $150 to fly you from here to, to New York, if their price

is at $198, the markup is $198 minus $150. So, they're marking up the price that,

the, the cost $48. That is the difference between what they

charge and what is cost them. If it cost them also just about probably

less than $150 to fly you from here to Chicago, and they're charging you $450,

they have a huge markup on that price. They're charging you a lot more than what

it cost them. And what I am showing you here is that the

more elastic a good is for the stuff I sell, the less leeway I have to markup the

price, and the more inelastic is the thing I sell, the more I can actually charge you

a price that is a lot larger than what it cost me to produce it.

So now, that gives you a lot more ideas about companies that have a large markup

and companies that have a small markup and it all depends on the elasticity of

demand. A really good example is Starbucks.

Who would have thought when, when they came out at some years ago that people

would pay so much money for coffee? I mean, that was just an idea that they

had, that if they kind of built a coffee shop with a different style and they

somehow create a better quality of, beans, people will be so kind of crazy about

buying coffee all the time. So, when Starbucks first came out, they,

they were able, once they, you know, they, they knew that they were on to something

and they had a hit, they were able to markup their price of coffee quite a bit.

So, they were actually able to, you can buy a, a Starbuck coffee for, for almost

five or six times what you will buy a coffee somewhere else in the gas station.

And just because it was Starbucks coffee. I mean, they were able to create the, the

idea in the consumer mind that the product, if you want a, a quality, good

quality coffee, you had to buy it from Starbucks.

So, therefore, their elasticity for demand, for the product was very inelastic

and they were able to markup their price quite a bit.

They lost that power because now we know that there is a lot of other companies

competing with Starbucks and now their whole idea of you buying non-fat, skimmed

soy latte is actually very common. But when it first came out, not many

people thought it was going to be a good idea.

So, Starbucks really hit into that and were able use the price inelastic of

demand for the product quite effectively to markup their price.

Produced by OCE at Atlas Digital Media at the University of Illinois, Urbana,

Champaign.

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