1. Elasticity of Demand
Chapter 4 Section 3

2. Demand Elasticity
Demand Elasticity: the extent to which a change in P causes a change in the Q demanded

3. 1. Elastic = small change in P causes a large change in Q demanded
2 types of elasticity
1. Elastic = small change in P causes a large change in Q demanded
example = fresh fruit
2. Inelastic = a change in P causes a smaller change or no change in Q demanded
Example: gas

4. Specific vs. General Market
Examples:
Specific: Exxon Gas Station
If P increases, people would go somewhere else: therefore it is elastic (flexible)
General: All Gas Stations
If P increases, people will have to pay the increase, therefore it is inelastic (nonflexible)

5. Determinants of Elasticity
Gas from
Exxon
Gas in
general
Needed medicine
Fresh
oranges
New
shoes
Electricity
Starbucks Coffee
Can the
purchase be
delayed?
Are adeq. substitutes available?
Does the purchase use a large part of income?
Type of
elasticity 1 2 3
If NO = inelastic If YES = elastic