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
2 types
1. Elastic = small change in P causes a large change in Q demanded
example = fresh fruit

3. 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 Demand Elasticity
1. Can the purchase be delayed?
2. Are adequate substitutes available?
3. Does the purchase use a large portion of income?
If NO = usually inelastic
If YES = usually elastic

6. Determinants of Elasticity
Gas from
Exxon
Gas in
general
Needed Medicine
oranges
New shoes
Utility service
Table salt
Can the
Purchase be
Delayed?
Are adeq. Substitutes available?
Does the purchase use a large part of income?
Type of
elasticity

7. Page 110 Identifying Key Terms:
1-8 Please write out the whole word, not just the letter
Reviewing the Facts:
1, 2, 4 and 5
Thinking Critically: 1
Applying Economic Concepts: 2