Chapter 4 Demand: Elasticity

Elasticity of Demand - measures the buyers sensitivity to _____ _______

​ (a)   demand - price changes have little effect on the quantity you buy.

​ (b)   demand - price changes have a significant effect on the quantity you buy.

• Inelastic
• Elastic

Inelastic demand means that price changes have ______ effect on the quantity you buy.

elastic demand means that price changes have ___________ effect on the quantity you buy

Are there substitutes available?

No - Prices ​ (a)   affect your demand much (​ (b)   )

yes - price ​ (c)   affect your demand much (​ (d)   )

• doesn't
• inelastic
• does
• elastic

Organize these options by the type of Elasticity it is associated with

Groups:

(a) Inelastic Demand

,

(b) Elastic Demand

• price changes have little effect on demand

• short-term

• a small portion of income is spent on the item

• long-term

• price changes have significant effect on demand

• Luxuries

• a large portion of income is spent on the item

• Necessities

Necessities have ​ (a)   Demand

Luxuries have ​ (b)   Demand

• inelastic
• elastic

In the Short term you have no other options

• True

• False

In the Long Term you have no other options

• True

• False

To find Total Revenue you ________ the price of the good by quantity sold