Elasticity of Demand

1
Elasticity of Demand

• Measure of how consumers react to a
  change in price

2
Inelastic Demand

• An increase in price will NOT greatly affect the
  demand for that product.

3
Elastic Demand

• An increase in price WILL greatly affect the
  demand for that product

4
Factors that affect elasticity

• Does the product have substitutes
• Y Elastic NInelastic
• Importance - of your budget
• - expensive vs. inexpensive
• expensive- elastic cheap-inelastic
• Necessity vs Luxury (needs vs wants)
• need-inelastic want-elastic

5
Which item is more Elastic?

1. 6 pack of cola or a ten speed bicycle
2. A school t-shirt or a school yearbook
3. Medical services for a badly cut hand or medical
   services for a runny nose
4. Cheeseburger or air conditioning in Arizona in
   the summer
5. Air conditioning in AZ this summer or Air
   conditioning in AZ over the next few summers

6
Answers Reason

1. 10 speed bicycle
2. School t-shirt
3. Runny nose
4. Cheeseburger
5. A/C next few summers

1. Expensive
2. Many Subs
3. Many subs/not a need
4. Many subs
5. Time to plan/subs