AGED 570: Teaching H.S. Agricultural Economics Day 7: Teaching Farm and Agribusiness Concepts Part 2

Todays agenda Terms Share Pair Muddiest Concept Elasticity Activity 1: Motivating Elasticity Elasticity Activity 2: Understanding Demand Elasticity Elasticity Activity 3: Synthesizing the Idea of Elasticity of Demand Terms for Tomorrow

Terms Share Pair Elasticity Own-Price Elasticity of Demand Own-Price Elasticity of Supply Cross-Price Elasticity of Demand Cross-Price Elasticity of Supply Elasticity of Demand Inelastic Unitary Elastic Elastic

Muddiest Point and Terms Discussion

Elasticity Activity 1: Motivating Elasticity Objective: To understand the need for elasticity Write down the general definition of slope when you have Y on the vertical axis and X for your horizontal axis What does slope tell us about Y and X? We have seen slope before in our previous economic classes, what were they? Discuss this with a partner.

Elasticity Activity 1: Motivating Elasticity Write down the general definition of elasticity utilizing that Y is on the vertical axis and X is on the horizontal axis How is elasticity similar to the idea of slope and how is it different? Discuss this with your partner Case 1: Suppose 10 individuals could move 10 tons of hay and 12 individuals could move 18 tons of hay in the same time period, what is the slope of hay (Y) to individuals (X)? What is this telling us?

Elasticity Activity 1: Motivating Elasticity Case 2: Now, suppose 10 individuals could move 20,000 pounds of hay and 12 individuals could move 36,000 pounds of hay in the same time period, what is the slope of hay (Y) to individuals (X)? How are these problems similar or different? Discuss with a partner? Now calculate the elasticity for each case. What did you find? What does the idea of elasticity do for us?

Activity 2: Understanding Demand Elasticity Objective: To calculate own-price elasticity of demand from a given demand curve, understand its effect on revenue, and be able to segment the demand curve into elastic, unitary elastic, and inelastic Students will get into two groups Group 1 will need to create a table that demonstrates the price and quantity demanded relationship for P = 12 – Q, where P represents the price of the good and Q represents the quantity demanded of the good Be sure to calculate each whole number price that is possible

Activity 2: Understanding Demand Elasticity Group 2 will need to create a table that demonstrates the price and quantity demanded relationship for P = 12 – 2Q, where P represents the price of the good and Q represents the quantity demanded of the good Be sure to calculate each whole number price that is possible Next, each group will calculate the elasticity for each price quantity relationship Does one of the elasticities you calculated not make sense? Next, each group will calculate the revenue for each price quantity relationship Next, each group will draw their respective demand curve

Activity 2: Understanding Demand Elasticity Finally, each group will segment their demand curve into the elastic portion, the elastic portion, and the inelastic portion

Activity 2: Understanding Demand Elasticity Thought Questions Is elasticity constant or changing on a linear demand curve? How does slope of the demand curve impact the elasticity? How is elasticity related to revenue? Why is elasticity of demand of interest to a producer?

Elasticity Activity 3: Synthesizing the idea of elasticity of demand Answer the following questions on your own based on the handout given: What does the elasticity of coffee mean? Why do you think the own-price elasticity of demand for gasoline in the short-run is greater than the own-price elasticity of demand for gasoline in the long-run? Choose one of the items on the list and compare its reported elasticity with your own elasticity for the item, why might these be different?

Elasticity Activity 3: Synthesizing the idea of elasticity of demand For your chosen item, are you more elastic, the same elasticity, or less elastic than the reported value? Why do you think most of the long-run elasticity estimates are more elastic than the short-run elasticity estimates? Do automobiles seem like an anomaly when you examine the short-run and long-run elasticities? Why is elasticity of demand an important concept to understand?

Come up with a definition for income elasticity of demand Once you have developed your definition, compare with a partner whether you came up with the same definition

What kind of examples could you use in your classroom to help students with these concepts?

Terms to know for Next Class Equilibrium Price Equilibrium Quantity Market Shortage Market Surplus Supply and Demand Analysis