Supply and Demand: Elastic vs Supply and Demand: Elastic vs. Inelastic Demand Shortage & Surplus Price Ceilings & Price Floors

Elasticity of Demand/Supply Elastic – demand (or supply) that is very sensitive to a change in price. Inelastic – demand that is not sensitive to a change in price $ $ D1 D1 Qs Qs

Shortage/Surplus Shortage – at a price below equilibrium a shortage will exist Surplus – at a price above equilibrium a surplus will exist S1 S1 $ $ D1 D1 Qs Qs

Shortage/Surplus Shortage – you don’t have enough items for all the people who want them. Demand > Supply. Surplus – you have more items than people want. Supply > Demand

Price ceilings A maximum price, set by the government, that can be charged for a product. Example is rent control in big cities (New York) S1 $ Price ceiling D1 Qs

Price Floors A minimum price, set by the government, that can be paid for a good or service. Example minimum wage S1 Price floor $ D1 Qs

Example of elasticity https://youtu.be/F99bVMDBQJQ Here is a video for the Sonny Rolly which was introduced in 2007. It did not sell because it was priced at 399.99 then reduced to 229.99. It is cool, but not at that price. They produced too many creating a surplus and had to lower price and now no longer made. Also, this is elastic demand because you don't need it etc.

Quiz Draw an Economic Model: Change in Demand – Increase Draw an Economic Model: Change in Demand – Decrease Draw an Economic Model: Change in Quantity Demanded – Increase Draw an Economic Model: Change in Quantity Demanded – Decrease