1. Demand Elasticity
Mr. Edwards
SAHS
2016

2. Three Cases of Demand Elasticity
Demand elasticity is the extent to which a change in price causes a change in the quantity demanded.

3. Three Cases of Demand Elasticity
Demand is elastic when a change in price causes a relatively larger change in quantity demanded.
Demand is inelastic when a change in price causes a relatively smaller change in quantity demanded.

6. Three Cases of Demand Elasticity
Demand is unit elastic when a change in price causes a proportional change in quantity demanded.
To measure the elasticity of demand, compare the percentage change in quantity demanded to the percentage change in price.

7. You may be thinking, what does this look like?
What does demand elasticity look like?

8. Elastic Demand P Small price change D Q
Large change in Quantity Demanded

9. Inelastic Demand P Large price change D Q
Small change in Quantity Demanded

10. Unit Elastic Demand P Prince Change D Q
Proportionate change in Quantity Demanded

11. In a nutshell….

12. Determinants of Demand Elasticity
Demand is usually inelastic if consumers cannot postpone the purchase of a product.
When acceptable substitutes are available for a product, demand becomes more elastic.

13. Determinants of Demand Elasticity
Demand for purchases that require a large portion of income is generally more elastic than the demand for purchases that require a smaller amount of income.

14. Examples of Inelastic Demand
Gasoline
Salt
Goods produced by a monopoly
Tap water
Cigarettes
Necessary medical items

15. Real Life James Bond villains!
Which brings us to….

16. Martin Shkreli
Heather Bresch

17. Examples of Elastic Demand
Gasoline from a specific station
Furniture
Automobiles
Professional Services
Airline tickets
Stocks