Chapter 4: Section 3: Elasticity of Demand

Chapter 4

Section 3: Elasticity of Demand

• We will define elasticity of demand.

• I will identify the difference between elastic and inelastic demand.

• I will define unit elastic.

• I will determine how total revenue is used to identify elasticity.

Dropdown

The desire for a product and the ability to pay for it is called ​

Select answer

.

Elasticity of Demand

Let's review: DEMAND

• The desire for a product and the ability to pay for it is called demand.

Elasticity of Demand

A measure of how responsive consumers are to price changes.

Elastic

Demand is elastic if....

quantity demanded changes significantly as price changes.

Inelastic

Demand is inelastic if....

quantity demanded changes little as price changes.

Teeth Whitening v. Cavity Filling

$100 to $400

$200 to $500

Page 118: with your learning partner, read the APPLICATION question and think about your response. Write your answer in a complete sentence so that we can share with the group.

What Determines Elasticity?

Factor 1: Substitute Goods or Services

• Insulin for diabetics is inelastic because no substitute exists for it. If the price goes up substantially, diabetics will still buy it.

• Meat products can be elastic because if the price of beef goes up, people will buy less and they can substitute it with chicken.

What Determines Elasticity?

Factor 2: Proportion of Income

• YOU EARN $50 per week for your chores. If your hobby is baking and the cost of eggs goes up substantially, then you'll probably bake less or stop until egg prices go back down unless your income increases.