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Demand THursday, February 3rd.

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Presentation on theme: "Demand THursday, February 3rd."— Presentation transcript:

1 Demand THursday, February 3rd

2 Elasticity of Demand Defined:
A term used to describe how consumers react to price changes in the marketplace

3 Elasticity of Demand Recall what the “law of demand” says Elastic
When the price of a good goes down, demand goes up, and when the price of a good goes up, demand goes down Not all goods and services follow this trend Elastic When price goes up or down, demand goes down or up Follows the law of demand Inelastic When price goes up, demand stays the same Can you think of any examples?

4 Elastic vs Inelastic Curves

5 What Determines Elasticity?
Substitute Goods or Services If there is no substitute for a good, the demand will likely be inelastic Example: Gasoline Proportion of Income Let’s say that you spend a percentage of your income on a hobby. If prices go up for parts of that hobby, you will likely not purchase as much. Demand for that product is elastic. If a good costs a small percentage of your income, it is likely to be inelastic Necessities vs Luxuries For needs, demand is usually inelastic For wants, demand is usually elastic

6 Elastic or Inelastic? Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

7 Elastic or Inelastic? Mountain Bike Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

8 Elastic or Inelastic? Gasoline Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

9 Elastic or Inelastic? Ice Cream Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

10 Elastic or Inelastic? Braces Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

11 Elastic or Inelastic? Table Salt Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

12 Elastic or Inelastic? Matches Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

13 Elastic or Inelastic? Movie Ticket Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

14 Elastic or Inelastic? Medication Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

15 Elastic or Inelastic? Soda Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

16 Elastic or Inelastic? Eating at a restaurant
Are there substitutes available? Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

17 Tiebreaker! Which is more elastic?

18 Elastic or Inelastic? Mountain Bike Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

19 Elastic or Inelastic? Gasoline Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

20 Elastic or Inelastic? Ice Cream Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

21 Elastic or Inelastic? Braces Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

22 Elastic or Inelastic? Table Salt Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

23 Elastic or Inelastic? Matches Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

24 Elastic or Inelastic? Movie Ticket Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

25 Elastic or Inelastic? Medication Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

26 Elastic or Inelastic? Soda Are there substitutes available?
Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

27 Elastic or Inelastic? Eating at a restaurant
Are there substitutes available? Yes: Elastic, No: Inelastic What percentage of your income does it use? Large: Elastic, Small: Inelastic Is it a necessity or a luxury? Luxury: Elastic, Necessity: Inelastic

28 On your sheet of paper, please respond to the following questions:
Exit Slip On your sheet of paper, please respond to the following questions: In your own words, what does elastic mean? What does inelastic mean? Why might producers want to know a product’s elasticity?

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