1. Do Now List 2 examples of an elastic good
List two examples of an inelastic good
Describe why these goods are either elastic or inelastic

2. Aim: How is elasticity determined?
Friday, October 12, 2012

3. Elastic
Elastic – a demand that is very sensitive to price change

4. Inelastic
Inelastic – describes demand that is not sensitive to price change
Ex.

5. Elasticity of Demand Elasticity of demand
Measures changes in the quantity demanded when prices change.
Some goods are very elastic and others are very inelastic.

6. How Elasticity is Calculated
To predict consumer behavior, economists use well-defined techniques evaluating the sensitivity of consumers to changes in price.
British economist Alfred Marshall developed a system for measuring elasticity.

7. Alfred Marshall’s Calculation
According to Marshall’s calculations most goods had an elasticity of demand between .5 and 1.5.
A good that is extremely inelastic has an elasticity of demand of 0.1.
A good that is extremely elastic has an elasticity of demand of 5.0.

8. Factors Affecting Elasticity
These factors are
the number of good substitutes.
The degree of necessity.
The proportion of a purchaser's budget consumed by the item.
The time period involved.

9. Goods
Elasticity of Demand
Inelastic
Salt
0.1
Matches
Toothpicks
Airline travel, short-run
Gasoline, short-run
0.2
Gasoline, long-run
0.7
Natural gas, short-run
Natural gas, long-run
0.5
Coffee
0.25
Fish (cod) consumed at home
Tobacco products, short-run
0.45
Legal services, short-run
0.4
Physician services
0.6
Taxi, short-run
Automobiles, long-run
Inelastic Goods
Quantity demanded is not very sensitive to a change in price.

10. Unitary Elastic
Good
Elasticity of Demand
Movies
0.9
Housing, owner occupied, long-run
1.2
Shellfish, consumed at home
Oysters, consumed at home
1.1
Private education
Tires, short-run
Magazines 1
Radio and television receivers
An increase in price leads to an equal percentage decrease in quantity demanded.
Example:
Price increase 15%
Quantity demanded decreases 15%

11. Elastic Goods Quantity demanded is very sensitive to price. Good
Elasticity of Demand
Restaurant meals
2.3
Foreign travel, long-run
4.0
Airline travel, long-run
2.4
Fresh green peas
2.8
Automobiles, short-run
Chevrolet automobiles
Fresh tomatoes
4.6
Quantity demanded is very sensitive to price.