Elasticity

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Bellringer Elasticity How responsive to price changes are you? 1. Which goods would you still buy if they quadrupled in price AND WHY? Toothpaste ($2) New XBOX & PS3 Video Games ($49) Notebook paper ($0.10) Burger King Whoppers ($1.99) Art Supplies ($8) New Washing Machine ($400)

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Transcript of Elasticity

Page 1: Elasticity

BellringerElasticity

How responsive to price changes are you?1. Which goods would you still buy if they

quadrupled in price AND WHY?Toothpaste ($2)

New XBOX & PS3 Video Games ($49)Notebook paper ($0.10)

Burger King Whoppers ($1.99)Art Supplies ($8)

New Washing Machine ($400)

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Review: Law of Demand

Netflix example http://news.yahoo.com/behind-increa

se-why-netflix-raising-prices-094058403.html

http://news.yahoo.com/behind-increase-why-netflix-raising-prices-094058403.html
http://news.yahoo.com/behind-increase-why-netflix-raising-prices-094058403.html
http://news.yahoo.com/behind-increase-why-netflix-raising-prices-094058403.html
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Read hand out

Elastic Demand Very responsive

to price change Most normal

goods Many

substitutes Why important

to think about as a firm?

Price/month

Quantity

D-nice apartments

1000

500

100

1000 5000 10,000

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Read hand out Inelastic Demand

Not responsive to price change

Few substitutes Necessities Ex: lifesavers Why does

government often control prices of inelastic goods?

Illegal drugs?

Price/dose

Quantity

D-dialysis100

1 2 3

200

300

400

500

600

700

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In Reality

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Summary


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Chapter 4: Elasticity. 4.1 Price Elasticity Elasticity is a measure of the responsiveness of one variable to another. The greater the elasticity, the.

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