Transcript elasticity

Notebook # 12
Economics 4-3
Elasticity of Demand
Economics 4-3
Elasticity of Demand
ESSENTIAL QUESTION:
Why is an understanding of
elasticity important for
business?
Economics 4-3
Elasticity of Demand
GPS STANDARDS:
SSEMI3c.) define price elasticity of demand and supply
Economics 4-3
Elasticity of Demand
• Consumers
react differently to price
changes depending on whether the good is
a necessity or a luxury.
•Elasticity measures how sensitive
consumers are to price changes.
Economics 4-3
Elasticity of Demand
Demand elasticity is the extent
to which a change in price
causes a change in the quantity
demanded.
•
Economics 4-3
Elasticity of Demand
• This type of elasticity is typical of the demand for
products like green beans, corn, tomatoes, or other
fresh garden vegetables.
•Because prices are lower in the summer, consumers
increase the amount that they purchase.
•When prices become considerably higher in the winter,
consumers normally buy fewer fresh vegetables and
used canned vegetables instead.
Economics 4-3
Elasticity of Demand
•Demand is inelastic when a
change in price causes a small
change in demand.
Economics 4-3
Elasticity of Demand
• This is typical of the demand elasticity of a product
like table salt.
• A lower or higher price for table salt does not bring
about much change in the quantity purchased
• If the price was cut in half, the quantity demanded
would not increase much because people can only
consume so much salt.
•If the price of salt doubled, consumers would demand
about the same amount because the portion of a
person’s budget that is spent on salt is so small.
Economics 4-3
Elasticity of Demand
Why is the demand for insulin is
inelastic?
There is a lack of adequate substitutes
for insulin and regardless of price a type-I
diabetic patient must have the insulin or
else they will die.