Warm Up Questions: If you were a business owner and you wanted to increase your income which would you choose - increase your prices or have a sale? Is it possible to make more money in both scenarios? Explain.

Elasticity of Demand Chapter 4 Section 3

Demand Elasticity The extent to which a change in price causes a change in the quantity demanded. – Elastic When a change in price causes a relatively large change in the quantity demanded – Inelastic When a change in price causes a relatively small change in the quantity demanded

Determinants of Demand Elasticity Can a purchase be delayed? – Yes would indicate elastic. Are adequate substitutes available? – Yes would indicate elastic. Does the purchase use a large portion of income? – Yes would indicate elastic. Two of three will determine elasticity.

Elastic or Inelastic? Table Salt – Can a purchase be delayed? – Are adequate substitutes available? – Does the purchase use a large portion of income? – Elastic Insulin – Can a purchase be delayed? – Are adequate substitutes available? – Does the purchase use a large portion of income? – Inelastic Gasoline from Kwik Trip – Can a purchase be delayed? – Are adequate substitutes available? – Does the purchase use a large portion of income? – Elastic

Chapter 4 Section 3 Review Page 104 #3 – 11 DUE TOMORROW DUE TOMORROW If you finish please work on your Chapter 4 Study Guide.