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How Supply & Demand Affects Prices

This guide explores the fundamental principles of supply and demand, focusing on how they affect prices and the concept of elasticity. Elasticity measures how demand for a good responds to price changes. For instance, if the price of a product drops from $599 to $249.99, the demand may increase significantly, indicating elasticity. In contrast, inelastic demand shows little change despite price fluctuations. Additionally, it covers the difference between normal and inferior goods, as well as substitutes and complementary goods, with examples to illustrate these economic concepts.

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How Supply & Demand Affects Prices

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  1. How Supply & Demand Affects Prices

  2. What does it mean to be elastic?

  3. Elastic When the demand for a good changes in response to change in price. Example $599.00 July 2007 $399.00 September 2007 $249.99 2010 $$$ Price Demand

  4. Inelastic With a partner try and come up with a definition for inelastic. Remember that we are referring to demand. Try and finish the sentence for inelastic. Elastic When the demand for a good changes in response to change in price. Inelastic When the demand for a good … does not change (or changes very little) in response to change in price. $2.50 2007 $3.50 2010

  5. With a partner decide if each example is elastic or inelastic. #1 #2 #3 #4

  6. Elastic or Inelastic With a partner, come up with other examples of projects that are elastic or inelastic.

  7. Normal vs. Inferior Goods

  8. Normal Goods If your income increased what’s the first thing you would you buy? Finish this sentence with a partner: I would buy a…..

  9. Normal Goods $249.99 This is the projected price for the next 3 years. It’s Christmas time and everyone just received $300 from family. What are you going to buy? You really want this phone, but you don’t have the money. Demand for the phone increases, but the coststays the same.

  10. What Does Inferior Mean?

  11. Inferior Goods Vs. Vs. What is an inferior good? Vs.

  12. Normal & Inferior Goods Turn to your shoulder buddy and make a list of normal vs. inferior examples. Normal Inferior Goods

  13. Substitute or Complementary Goods

  14. Substitution Good Which item would you purchase? Why? $2.49 $4.99 If the cost of butter increases, the demand for margarine increases. $3.75 $1.25 If the cost of coffee increases, the demand for tea increases.

  15. Complementary Good It’s July 4th and is having a sale on hot dog buns. What are you going to buy to go with the hot dog buns? Summer 2010, there was a massive recall on peanut butter. People stopped buying peanut butter. What other complementary good would people have stopped buying?

  16. Association Game

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