Elasticity
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This document discusses concepts of elasticity and inelasticity of demand. It provides examples of goods and their likely responsiveness to price changes, from very elastic demands like video games to more inelastic demands like necessities. The document also discusses why firms and governments consider elasticity, with elastic goods having more responsive quantities to price changes for firms and inelastic goods sometimes having price controls from governments.
Elasticity
- 1. 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)
- 2. Review: Law of Demand Netflix example http://news.yahoo.com/behind-increase-why- netflix-raising-prices-094058403.html
- 6. 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
- 7. 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
- 8. In Reality
- 9. Summary