Modern economics has developed to three levels: macro, meso and micro, and the analytical method has also changed from the initial qualitative analysis to quantitative analysis. Beginners of macroeconomics and microeconomics are frightened by non-professionals like me because of their intensive mathematical models and deductions. In fact, economics comes from life, and economic principles permeate every corner of daily life and production, and economic principles can be widely used in life. Every human behavior can be explained by economics, and people unconsciously apply the laws of economics in their daily lives. For example, the price of commodities is closely related to the demand price elasticity of commodities, the production cost and profitability of enterprises.

Changes in prices will cause changes in demand. However, different commodities react differently to price changes. Some commodity prices change greatly, while demand changes little; The prices of some commodities have not changed much, but the demand has changed greatly. "Cheap grain hurts farmers" is a long-standing saying in China, which describes such an economic phenomenon: in the harvest year, farmers' income actually decreased. This seemingly incomprehensible phenomenon can be explained by the principle of elasticity. "

Elasticity theory is to explain the relationship between price change rate and demand change rate. Demand price elasticity refers to the ratio of the change rate of demand (sales volume of an enterprise) of a commodity to its price change rate. It reflects the sensitivity of commodity demand to its price changes. The ratio of demand change rate to price change rate is the elastic coefficient of demand price elasticity. that is

Elasticity coefficient of demand price = demand change rate ÷ price change rate

That is, the calculation formula of demand price elasticity is: Ed=(△Q÷Q)╱(△P÷P)

=[(q2—q 1)╱q 1]÷[(p2—p 1)╱p 1]

What it shows is that when the price rises 1%, the percentage of demand decreases, or when the price falls 1%, the percentage of demand increases. When │ ed │ < 1, demand is said to be inelastic. At this time, the range of demand change is less than the range of price change; │ ed │ > 1, demand is called elasticity. At this time, the range of demand change is greater than the range of price change.

When the price of a commodity changes, its demand elasticity is closely related to the change of total income caused by the price change. This is because the total income is equal to the price multiplied by the sales volume, and the change of price causes the change of demand, which in turn causes the change of sales volume. The demand elasticity of different commodities is different, so the change of sales volume caused by price change is different, and the change of total income is also different.

If the demand of a commodity is elastic, when the price of the commodity falls, the increase of demand is greater than the decrease of price, then the total income will increase; When the commodity price rises, the demand decreases more than the price increases, so the total income will decrease. For example, the price of a commodity per kilogram of 2 yuan, the sales volume is 1000 kilograms, and the demand elasticity of this commodity is 2.5. If the price of this commodity is reduced to per kilogram 1.8 yuan, what will happen to the total income?

Given that p1= 2q1=1000ed = 2.5p2 =1.8, let the percentage of demand change be x.

Then ed = [(Q2-q1) ÷ q1] ÷ [(P2-p1) ÷ p1] 2.5 = x 2.0 ÷ (/kloc)

X=0.25, that is, the sales volume increased by 25% after the price dropped, so Q2 =1000× (1+0.25) =1250kg.

Total income: tr1= p1× q1= 2×1000 = 2000 yuan.

Tr2 = p2× Q2 =1.8×1250 = 2250 yuan Tr2-Tr 1 = 250 yuan.

Therefore, after the price reduction, the total income of commodities increased by 250 yuan. This is the reason why flexible goods are "small profits but quick turnover".

If the demand for a commodity is inelastic, the opposite is true. For example, the demand curve of cigarettes is inelastic, because addicted smokers don't care about the price, so the price has little effect on the demand of cigarettes. Another example: There is an old saying in China that "cheap grain hurts farmers", which means a bumper harvest. Farmers' income has decreased because of falling food prices. The reason is that food is a necessity and the demand price elasticity is small. In other words, people will not eat more because food is cheap, and the decrease in food prices caused by a bumper harvest will not increase demand in the same proportion, thus reducing total income and making farmers suffer losses. Moreover, food is a necessity, and the income elasticity of demand is also small, that is to say, the increase of people's income has not increased food consumption. In capitalist society, the practice of destroying food and agricultural products during the economic crisis is also due to the lack of flexibility in the demand for food products. Reducing prices will not greatly increase demand, but will only reduce total income, so capitalists will reduce losses by destroying these agricultural products.

I believe that with the deepening of study, we will learn more similar economic laws that are unconsciously applied in daily life, and we can use these laws to analyze the reasons behind them.